Economic Thought Before Adam Smith: An Austrian Perspective on the History of Economic Thought, 2 vols.

Thornton, Mark

The claims grow increasing implausible, but the economics profession continues to preen its image as a "hard science" like physics or chemistry. Formalism, positivism, and econometrics are extolled and venerated, while the study of the history of economic thought is denigrated and displaced from graduate studies.

As a traditionalist of the Austrian school of economic analysis, I hope that the publication of Murray N. Rothbard's two-volume treatise marks the beginning of the end of this unfortunate state of professional orthodoxy. More than a historian of thought, and more than an economist, Rothbard was responsible for the survival and rebirth of Austrian economics in the post-Mises period, while his theory of political economy gave birth to the modern libertarian movement. These works, in many ways the culimination of a lifetime of study, appeared about the time of Rothbard's death on January 7, 1995.

Rothbard's treatise makes a good case for the study of economic thought and provides a good introduction to Austrian economics by showing its links with earlier thinkers. Every reader will discover material to raise hackles, but friend and foe alike will benefit from Rothbard's atypical approach. His discussions of every thinker are enriched with insights on philosophy, history, religion, political movements, and the philosophy of science. The two volumes are jam-packed with information and research ideas.

This is the first comprehensive treatment of classical and preclassical economics from an Austrian perspective since Joseph Schumpeter's History of Economic Analysis. A third planned volume on the neo-classical period will be completed by Rothbard's student, Joseph Salerno, who will also now serve as a co-editor for Rothbard's journals, the Journal of Libertarian Studies and the Review of Austrian Economics.

There are some notable differences and similarities with Schumpeter beyond the uncompleted status of both projects. As Austrian economists, both emphasized theory and method - Schumpeter gravitated to Walras and technical analysis, while Rothbard became the leading proponent of Ludwig yon Mises' praxeological method with its deductive method and its insistence that the basic tools of economic analysis are applicable to all areas of human action.

Schumpeter paid much attention to the development of the rudimentary elements of technical economics, which Rothbard considers unimportant, if not disruptive and harmful. Rothbard demonstrates the important connection between economic ideas and economic policy by showing the central role economists have played in the history of the battle between statism and laissez-faire with Rothbard championing the cause of economic theory and laissez-faire. Schumpeter, on the other hand, rejected discussion of economic policy and political economy and purposefully obscured his own insightful views of the world.

On one matter, however, these two masters concurred. Both were earnestly unimpressed by the father of economics, Adam Smith. In complete contrast to the commonly accepted view in the economics profession, their view could be summed up by saying that there is nothing important in Smith (especially the Wealth of Nations) that is both new and true. Rothbard goes beyond Schumpeter in both his theoretical criticisms and in questioning Smith's laissez-faire credentials. Readers will be bewildered.

Rothbard eschews the Great Man approach to the study of the history of economic thought that concentrates on six to ten major contributors. He examines the detailed and difficult process of the development of economic theory in which many individuals make contributions and introduce error. This is an involved process. He spends six chapters and over two hundred pages covering pre-mercantilist thought, a topic that is typically covered in one chapter of a textbook. This approach involves many lesser-known figures, their contributions and lives, and also makes for interesting and engaging reading.

Another important facet is Rothbard's rejection of what he calls the Whig theory of history - that history is progress - and that applied to economics says that economic thought is always improving over time and that current economic thinking represents the very best of economic thought as distilled through the ages. Rothbard accepts Kuhn's theory of paradigms where scientists work within a paradigm and occasionally shift in mass to new (not necessarily better) paradigms so that science zigzags along a trend rather than moving along the trend line itself. Knowledge is lost and error is introduced.

While generally a long-run optimist, Rothbard's detailed and highly critical approach unveils a series of successes and failures. Democritus, Lao Tzu, the Spanish scholastics, Cantillon, and Turgot represented wonderful breakthroughs, while the mercantilists, Smith, Ricardo, Marx, and even John Stuart Mill were important setbacks. Because history is not necessarily progress, the study of the history of economic thought can lead to the discovery of old, but obscured truths and help avoid the repeating of old errors.

Another interesting aspect of Rothbard's perspective is the central role that religion plays in the development of economic science. Until recently, the study of religion in modern economics, like in public schools, had been virtually eliminated. Stumbling onto Emil Kauder's hypothesis, Rothbard finds that religion provides a dividing line between his list of heroes and his list of enemies. He finds a general tendency for economic theorists and supporters of laissez-faire to come from cultures influenced by Catholicism and Aristotelian philosophy while proponents of the labor theory of value and state control tend to be from Protestant cultures influenced by Calvinism.

When I first heard the Kauder thesis, it seemed bizarre, but a decade of reflection and the study of such issues as slavery and prohibition has convinced me that it has some validity to the extent that religion can affect intellectual development and ideology can affect public policy. The development and confirmation of the Kauder thesis represents a major contribution.

Besides those already mentioned, Rothbard provides in-depth coverage of mercantilism, French economic thought, the bullionist controversy, and Marx's economics. Likewise several important economists receive scant attention, but as one perceptive reviewer noted, this list consists of economists who received excellent coverage in the leading text in the field by Ekelund and Hebert. Because of his untimely death, it is indeed a shame that Rothbard's informative and entertaining perspective will not be brought to bear on the neoclassical period and the likes of Irving Fisher, Thorstein Veblan, Henry Simons, and John Keynes. His writings on economic history already hold important insights on economists and economic policy of this period that are tragically ignored in most histories.

The manuscript does suffer on several accounts. The referencing system is inadequate and for quotations it is nonexistent. There are excellent bibliographic essays the reader can use to find his way around the literature, but this requires more study than should be necessary. The comprehensive list of references and the indexing seems inadequate for such a work. So while new ideas for papers may jump off the pages, it is difficult to use the volumes as a quick and dirty reference tool. There are also too many typos for something that sells for one hundred dollars a volume.

Rothbard's treatise will certainly infuriate some historians of thought, but it should help stimulate the renewed interest in the history of economic thought that is developing around the world. Like most of his work, these books will be controversial and should be considered dangerous to professional cohesion. With Keynesian economics crumbling, modern macro in disarray, and new exciting developments in micro-based economics, Rothbard's Austrian perspective on the history of economic thought maybe one of the final straws that breaks open the dam and floods in a new paradigm shift in the economics profession.

Mark Thornton Auburn University