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Source link: http://archive.mises.org/11287/doherty-reviews-mises-institutes-new-book/

Doherty Reviews Mises Institute’s new book

December 18, 2009 by

A very interesting review of Rothbard v. The Philosophers up at Reason, by Brian Doherty, who tends to write about things that truly matter.


DG Lesvic December 18, 2009 at 9:26 pm

Here, an interesting addition, perhaps, to your collection, Rothbard’s letter to me of Dec. 13, 1980.

“However many testimonials you acquire doesn’t change the fact that none of the gentlemen you list considered your paper in the capacity of an editor of a scholarly journal. Even if I agreed with your thesis, it still would not be suitable for publication in a scholarly journal because it is too brief and devoid of any scholarly apparatus.”

And they say he isn’t a good union man.

“As far as I can make your thesis and its development out, I don’t agree with it. I don’t think that market equilibrium establishes differentials; it establishes market wages period.” (How could something establish wages without also establishing the differentials among them?) “Therefore, if someone is working at a job where his marginal revenue product is $50,000 he will tend to earn $50,000, and similarly for the man working at a $10,000 job. The fact that the government might be taxing the first man $10,000 and paying the second one $2,000 doesn’t affect the marginal revenue products or their market wages. There is no hidden hand or any other reason why things must change to reestablish the alleged equilibrium differential; the market is only concerned with marginal revenue products and not what happens to the person’s income outside the market.” (What happens to the person’s income “outside the market” is what “government” does to it, either reducing it by taxation or increasing it by subsidy. So when Rothbard says the market isn’t concerned with this, he’s saying that taxation and subsidy have no effect upon incentive and the allocation of manpower.) “Now it is true that some $50,000 people might leave in disgust,” (Now he admits that taxation may have some effect upon the allocation of manpower) “but to do what? If they drop out altogether, there will be a cut in supply and a rise in MRP and wage rates, but I can’t believe that the effect will be very large. Certainly there is no market compulsion for it to be significantly large.” (So, there will be some effect after all upon allocation, but an insignificant one, so forget about it!) “Also, you seem to imply that the $50,000 people will leave in order to become $10,000 men, which strikes me as absurd.”

I don’t have to argue against this, because Rothbard does it for me, in Power and Market, Pp 121, 2.

“Many economists – notably the members of the Chicago School – believe that they champion the ‘free market’ and yet…see no inconsistency in then advocating drastic taxation and subsidies. They believe that these can alter the ‘distribution’ of incomes without lowering the efficiency of productive allocations. In this way they rely on an equivalent of Keynesian money illusion – a tax illusion – a belief that individuals will arrange their activities according to their gross rather than net (after-tax) income. This is a palpable error.” (Except when Rothbard himself commits it.)

So, to deny a new idea in economics, he denied his own published words, and, economics itself, for, if taxation doesn’t affect the market, nothing does, and there’s no such thing as economics.

For the new idea he didn’t care for, and the whole context of his letter, see


Inquisitor December 18, 2009 at 11:59 pm

DG are you another fruitloop with a chip on your shoulder? Just curious.

DG Lesvic December 19, 2009 at 1:26 am


Do you know of any independent and innovative thinker who wasn’t?

DG Lesvic December 19, 2009 at 1:37 am

Grand Inquisitor,

And here is Rothbard’s answer to your question:

“…advances come as students and disciples stand on the shoulder of their great master. All too often, however, the masters repudiate or fail to see the value of the advances of their successors.”

Inquisitor December 19, 2009 at 1:39 am

No I am curious if you are like Aguilar who has some vendeta to play out here, though from seeing other posts of yours I guess not.

DG Lesvic December 19, 2009 at 2:25 am


No, you were right in the first place, I do have a psychopathic agenda, a “vendetta to play out here,” and at whatever cost to reason, science, and economics. But, as Mises pointed out, it doesn’t matter, for, as a scientist, you are “bound to reply to every censure without any regard to its underlying motives or its background.”

When are you going to get around to that?

Inquisitor December 19, 2009 at 2:30 am

Actually, I disagree with Mises there for the reason that not everyone who has an “agenda” to push is worth spending time on. Scarcity of time and all that. Cranks beyond any hope of giving up the nonsense they believe (e.g. Larouche fanatics) fall into the category of people not to waste time on. So…

DG Lesvic December 19, 2009 at 11:11 am


From my letter to Rothbard soliciting his opinion:

“May I ask a favor both for myself and our mutual friends above? All of them have shown a kind interest in my attempts at economics, and some more than that. Responding to my essay, Defending the New Idea in Austrian Economics, Leonard Read expressed ‘agreement’ with the new idea, and Walter Block agreement and congratulations; Henry Hazlitt allowed that it ‘may be right,’ Jack High thought it ‘interesting and provocative,’…Israel Kirzner ‘found it written with keen intelligence,’ and Arthur Laffer that it ‘provides keen insight into the weaknesses of redistributionist policies.’ But, since you rejected the essay, I assume you’ve found a weakness in the theory which the rest of us have missed. I’d be most grateful if you’d tell me what it is so I may share the benefit of your thoughts with our good friends above.”

And quite a few other notable economists, including Rothbard, though they didn’t agree with it, found my thesis worth spending time on.

My only problem with them is that they did it all behind closed doors rather than out in the open

Here is what Hayek said about the whole thing:

“Redistribution” is “the crucial issue on which the whole character of future society will depend” and “it would be disingenuous to avoid discussing this issue.”

Suppose, instead of all the time you’re spending on avoiding it, you faced it.

Inquisitor December 19, 2009 at 2:18 pm

Faced what, pray tell? That taxation isn’t neutral? Why would I disagree with that? Oh, you want me to tell you why Rothbard didn’t care for it? Don’t know nor do I care. If it bothers you get a medium and contact him?

DG Lesvic December 19, 2009 at 3:26 pm


This is the thesis:

From the general proposition that, for every action against the market, there is an opposite and more than equal reaction, it follows that taking from the rich to give to the poor can not reduce but only increase income inequality and “social injustice.”

Here is a cursory explanation of it:

Taking from the rich to give to the poor doesn’t just draw money but manpower downward upon the hierarchy of production, and the manpower faster than the money. For manpower doesn’t merely follow money but anticipates it. And, with manpower and competition among the poor increasing faster than the redistributed money, they’ll be poorer than they would have been without it.

I hope that will spur more interest on your part.

From the general proposition that all action against the market is counterproductive, that, for every such action there is an opposite and more than equal reaction, it follows that taking fr

Taking from the rich to give to the poor does not reduce but increases income inequality

DG Lesvic December 19, 2009 at 4:08 pm


Let me elaborate.

There is what I believe is called the First Law of Thermodynamics:

For every action there is an opposite and equal reaction.

In the market, it is more than equal, for human beings, anticipating even greater action against the market later on, react in advance of it, and, in effect, overreact to the current action alone.

So, in the case of redistribution, meant to reduce income differentials, the market doesn’t just restore the old differentials but establishes even greater ones.

What do you think of that?

David Bratton December 20, 2009 at 6:42 am

@DG “There is what I believe is called the First Law of Thermodynamics:”

Um… actually that was the third law of inertia.

DG Lesvic December 20, 2009 at 12:11 pm


That’s very interesting, but what do you call an institute in which no one has anything to say about the issue of greatest concern to Mises?

To Mises, “to take from one group to give to another” was “the essence of the interventionist policy.”

And what has been the response to the man trying to raise that very issue within The Mises Institute?

Nothing, so far, except the insinuation that he is a “fruitloop with a chip on his shoulder” and nothing but a “vendetta” on his mind.

Is an institute that can do no better than that entitled to call itself The Mises Institute?

David December 20, 2009 at 11:15 pm

DG Lesvic,

Are you saying that people generally overreact to new information in the market?

I guess if you were looking at the stock market, that could be true, but aren’t we engaging in speculation there by ignoring the possibility that many people underreact to new information?

Same goes on the labor market, where I speculate that people underreact, as they are resistant to change that affects their immediate surroundings. But again, I’m just speculating.


DG Lesvic December 21, 2009 at 10:13 am


Here, again, my thesis in a nutshell:

Taking from the rich to give to the poor doesn’t just draw money but manpower downward upon the hierarchy of production, and the manpower faster than the money. For manpower doesn’t merely follow money but anticipates it. And, with manpower and competition among the poor increasing faster than the redistributed money, they’ll be poorer than they would have been without it.

As I’m sure you can see, this is a theory of interference with the market and not of the market by itself.

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