There Can Be No Calculation Problem in the Evenly Rotating Economy (ERE) Because No Calculation There Is Necessary

The proof-by-listing-of-mathematical-equations is no proof at all. It applies, at best, only to the evenly rotating economy. Obviously, our whole discussion of the calculation problem applies to the real world and to it only. There can be no calculation problem in the ERE because no calculation there is necessary. Obviously, there is no need to calculate profits and losses when all future data are known from the beginning and where there are no profits and losses.  In the ERE, the best allocation of resources proceeds automatically. For Barone to demonstrate that the calculation difficulty does not exist in the ERE is not a solution; it is simply a mathematical belaboring of the obvious. The difficulty of calculation applies to the real world only.

—Murray N. Rothbard, Man, Economy, and State with Power and Market, 2nd ed. of the Scholar's ed. (Auburn, AL: Ludwig von Mises Institute, 2009), 616.

The Classical Economists Were Right; The Public Debt is a DOUBLE Burden on the Free Market

Lending to government, therefore, may be voluntary, but the process is hardly voluntary when considered as a whole. It is rather a voluntary participation in future confiscation to be committed by the government. In fact, lending to government twice involves diversion of private funds to the government: once when the loan is made, and private savings are diverted to government spending; and again when the government taxes or inflates (or borrows again) to obtain the money to repay the loan. Then, once more, a coerced diversion takes place from private producers to the government, the proceeds of which, after payment of the bureaucracy for handling services, accrues to the government bondholders. The latter have thus become a part of the State apparatus and are engaging in a “relation of State” with the tax-paying producers.

137 Hence, despite Buchanan’s criticism, the classical economists such as Mill were right: the public debt is a double burden on the free market; in the present, because resources are withdrawn from private to unproductive governmental employment; and in the future, when private citizens are taxed to pay the debt. Indeed, for Buchanan to be right, and the public debt to be no burden, two extreme conditions would have to be met: (1) the bondholder would have to tear up his bond, so that the loan would be a genuinely voluntary contribution to the government; and (2) the government would have to be a totally voluntary institution, subsisting on voluntary payments alone, not just for this particular debt, but for all in transactions with the rest of society.

—Murray N. Rothbard, Man, Economy, and State with Power and Market, 2nd ed. of the Scholar's ed. (Auburn, AL: Ludwig von Mises Institute, 2009), 1027, 1027n137.

Since the Purchasing Power of Money Can Vary, Some Economists Tried to Improve on the Free Market by Creating a Monetary Unit with Stable and Constant Purchasing Power

The knowledge that the purchasing power of money could vary led some economists to try to improve on the free market by creating, in some way, a monetary unit which would remain stable and constant in its purchasing power. All these stabilization plans, of course, involve in one way or another an attack on the gold or other commodity standard, since the value of gold fluctuates as a result of the continual changes in the supply of and the demand for gold. The stabilizers want the government to keep an arbitrary index of prices constant by pumping money into the economy when the index falls and taking money out when it rises. The outstanding proponent of “stable money,” Irving Fisher, revealed the reason for his urge toward stabilization in the following autobiographical passage: “I became increasingly aware of the imperative need of a stable yardstick of value. I had come into economics from mathematical physics, in which fixed units of measure contribute the essential starting point.” Apparently, Fisher did not realize that there could be fundamental differences in the nature of the sciences of physics and of purposeful human action.

It is difficult, indeed, to understand what the advantages of a stable value of money are supposed to be. One of the most frequently cited advantages, for example, is that debtors will no longer be harmed by unforeseen rises in the value of money, while creditors will no longer be harmed by unforeseen declines in its value. Yet if creditors and debtors want such a hedge against future changes, they have an easy way out on the free market. When they make their contracts, they can agree that repayment be made in a sum of money corrected by some agreed-upon index number of changes in the value of money. Such a voluntary tabular standard for business contracts has long been advocated by stabilizationists, who have been rather puzzled to find that a course which appears to them so beneficial is almost never adopted in business practice. Despite the multitude of index numbers and other schemes that have been proposed to businessmen by these economists, creditors and debtors have somehow failed to take advantage of them. Yet, while stabilization plans have made no headway among the groups that they would supposedly benefit the most, the stabilizationists have remained undaunted in their zeal to force their plans on the whole society by means of State coercion.

—Murray N. Rothbard, Man, Economy, and State with Power and Market, 2nd ed. of the Scholar's ed. (Auburn, AL: Ludwig von Mises Institute, 2009), 847-848.

The “Demand for Money” Is Not and Cannot Be Unlimited; Demand on the Market Refers to “Effective” Demand (By the Fact That Something Else Is “Supplied” for It)

A popular fallacy rejects the concept of “demand for money” because it is allegedly always unlimited. This idea misconceives the very nature of demand and confuses money with wealth or income. It is based on the notion that “people want as much money as they can get.” In the first place, this is true for all goods. People would like to have far more goods than they can procure now. But demand on the market does not refer to all  possible entries on people’s value scales; it refers to effective demand, to desires made effective by being “demanded,” i.e., by the fact that something else is “supplied” for it. Or else it is reservation demand, which takes the form of holding back the good from being sold. Clearly, effective demand for money is not and cannot be unlimited; it is limited by the appraised value of the goods a person can sell in exchange and by the amount of that money which the individual wants to spend on goods rather than keep in his cash balance.

Furthermore, it is, of course, not “money” per se that he wants and demands, but money for its purchasing power, or “real” money, money in some way expressed in terms of what it will purchase. (This purchasing power of money, as we shall see below, cannot be measured.) More money does him no good if its purchasing power for goods is correspondingly diluted.

--Murray N. Rothbard, Man, Economy, and State with Power and Market, 2nd ed. of the Scholar's ed. (Auburn, AL: Ludwig von Mises Institute, 2009), 772-773.

The Keynesian Prescription for Eliminating Unemployment Rests on the Money Illusion

Keynes believed that while other elements of the economic system, including prices, were set basically in real terms, workers bargained even ultimately only in terms of money wages--that unions insisted on minimum money wage rates downward, but would passively accept falling real wages in the form of rising prices, money wage rates remaining the same. The Keynesian prescription for eliminating unemployment therefore rests specifically on the "money illusion"--that unions will impose minimum money wage rates, but are too stupid to impose minimum real wage rates per se. 

--Murray N. Rothbard, Man, Economy, and State with Power and Market, 2nd ed. (Auburn, AL: Ludwig von Mises Institute, 2009), 783-784.

Monopoly Can Be Meaningfully Defined Only As a Grant of Privilege by the State

[Rothbard] expounds a completely new theory of monopoly—that monopoly can be meaningfully defined only as a grant of privilege by the State, and that a monopoly price can be attained only from such a grant. In short, there can be no monopoly or monopoly price on the free market.

--Murray N. Rothbard, preface to revised edition of Man, Economy, and State with Power and Market, 2nd ed. (Auburn, AL: Ludwig von Mises Institute, 2009), lvii.

One of Rothbard’s Greatest Accomplishments in Production Theory Was Integrating Temporal Production-Structure Analysis with Pure-Time-Preference Theory

In Man, Economy, and State, Rothbard elaborates a unified and systematic treatment of the structure of production, the theory of capital and interest, factor pricing, rent theory, and the role of entrepreneurship in production.... One of Rothbard’s greatest accomplishments in production theory was the development of a capital and interest theory that integrated the temporal production-structure analysis of Knut Wicksell and Hayek with the pure-time-preference theory expounded by Frank A. Fetter and Ludwig von Mises.

Although the roots of both of these strands of thought can be traced back to Böhm-Bawerk’s work, his exposition was confused and raised seemingly insoluble contradictions between the two. They were subsequently developed separately until Rothbard revealed their inherent logical connection.

--Joseph T. Salerno, introduction to the second edition of Man, Economy, and State with Power and Market, by Murray N. Rothbard (Auburn, AL: Ludwig von Mises Institute, 2009), xxvii.

Rothbard on Keynes: The Keynesian Wonderland Where All Economic Truths are Vitiated or Reversed

Of particular interest to us is the sudden emergence of the “unemployment problem” in economic theory. The Keynesians, in the mid-1930’s, inaugurated the fashion of declaiming: Neoclassical economics is all right for its special area, but it assumes “full employment.” Since “orthodox” economics “assumes full employment,” it holds true only so long as “full employment” prevails. If it does not, we enter a Keynesian wonderland where all economic truths are vitiated or reversed.

--Murray N. Rothbard, Man, Economy, and State with Power and Market, 2nd ed. (Auburn, AL: Ludwig von Mises Institute, 2009), 582.

The Neoclassical Synthesis Jumbled Together the Marshallian and Walrasian Approaches to Price Determination with Keynesian Macroeconomics

After World War II, a new and stifling orthodoxy known as the “neoclassical synthesis” had descended upon economics, especially in the United States. This so-called “synthesis” was actually a hodgepodge of the three disparate approaches that had overwhelmed the Mengerian causal-realist approach in the interwar period. It jumbled together the Marshallian and Walrasian approaches to price determination with Keynesian macroeconomics. The first two approaches focused narrowly on analyzing the determination of unreal, equilibrium prices either in single markets (partial equilibrium) or in all markets simultaneously (general equilibrium). Keynesian macroeconomics denied the efficacy of the price system altogether in coordinating the various sectors of an economy confronted with the “failure of aggregate demand.”

--Joseph T. Salerno, introduction to the second edition of Man, Economy, and State with Power and Market, by Murray N. Rothbard (Auburn, AL: Ludwig von Mises Institute, 2009), xxi-xxii.