Rothbard on Smith

In my previous post I offered one example of what I view as Rothbard’s willingness to make bad arguments. A more important example, one I discussed online at some length back in the days of Usenet, is his account of economic history, his misrepresentation of Adam Smith (unfavorable) and his French contemporaries, especially Turgot (favorable). That controversy was revived when David Gordon posted an article on the Mises Daily web site defending Rothbard against my criticism and I responded. All the relevant evidence is findable: An Austrian Perspective on the History of Economic Thought (volume II) by Murray Rothbard, The Wealth of Nations by Adam Smith, and The Turgot Collection, edited by David Gordon with an introduction by Murray Rothbard.

Taxation

Rothbard writes:

“And finally, Adam Smith advocated the soak-the-rich policy of progressive income taxation.”^¹ 

I could find no support in Rothbard’s book for that claim, and it is false twice over. To begin with, Smith was opposed to any sort of income tax, with the possible exception of a tax on the income of government employees. Here is his comment on “Taxes which, it is intended, should fall indifferently upon every different Species of Revenue”:

Capitation taxes, if it is attempted to proportion them to the fortune or revenue of each contributor, become altogether arbitrary. The state of a man’s fortune varies from day to day, and without an inquisition more intolerable than any tax, and renewed at least once every year, can only be guessed at. His assessment, therefore, must in most cases depend upon the good or bad humour of his assessors, and must, therefore, be altogether arbitrary and uncertain.

Further, as Rothbard himself notes only a few pages later, the first of Smith’s canons of taxation was that: 

The subjects of every state ought to contribute towards the support of government, as nearly as possible, in proportion to their respective abilities; that is, in proportion to the revenue which they respectively enjoy under the protection of the state.²

That implies tax incidence proportional to income, flat not progressive taxation. Smith, unlike most modern politicians and journalists, distinguished between who hands over the money and who actually bears the cost. What he is arguing for is not a tax on income but a system of taxation whose incidence is proportional to income.³ 

Rothbard also objects that Smith was not really a free trader, offering as one example his support for export taxes on wool.⁴ Smith, like Cantillon and Turgot, contemporary French economists of whom Rothbard speaks favorably, was not, like Rothbard himself, an anarchist; all of them believed in a government providing (at least) national defense and paying for it with taxes. That left them with the problem of picking the least bad form of taxation.

What made Smith a free trader was that he regarded the effect on the economy of import and export taxes, including that one, as bad, not a policy objective but a cost of raising needed money. The difference between him and Turgot was not that one believed more in the virtues of free trade than the other but that Turgot, along with the physiocrats with whom he was associated, thought the ideal system of taxation would collect all of its revenue from the net produce of land,⁵ while Smith discussed the advantages and disadvantages of a wide range of alternative taxes.

What Rothbard does not mention is that, at the time Smith was writing, the export of wool was a criminal offense which the government tried to prevent by extensive regulations over the wool trade, described in detail by Smith. He proposed replacing the ban with a tax, which would have been a large reduction in government interference with trade. Rothbard has to have known that most of his readers would not know that. It is as if someone writing a century from now denied that one of our contemporaries was opposed to the war on drugs on the evidence of his proposal that marijuana should be taxed — without mentioning that the tax was part of a proposal to legalize it.

            Smith, Turgot, and public education

Rothbard writes, quoting Smith:

 “(T)he security of every society must always depend, more or less, upon the martial spirit of the great body of the people.” And adds:

It was an anxiety to see government foster such a spirit that led Smith into another important deviation from laissez-faire principle: his call for government-run education.

The first problem with this is that Smith did not call for government-run education. In the course of a lengthy discussion he offered arguments both for and against a government role in education. His conclusion, which Rothbard does not mention, was that a partial subsidy to the education of the masses would not be unjust but that it would be equally proper, and might be better, to leave education entirely private.

“The expence of the institutions for education and religious instruction, is likewise, no doubt, beneficial to the whole society, and may, therefore, without injustice, be defrayed by the general contribution of the whole society. This expense, however, might perhaps with equal propriety, and even with some advantage, be defrayed altogether by those who receive the immediate benefit of such education and instruction, or by the voluntary contribution of those who think they have occasion for either the one or the other.”⁶

Rothbard’s reference to “martial spirit” in connection with “His devotion to the militarism of the nation-state” is a misleading one. Smith writes: 

But the security of every society must always depend, more or less, upon the martial spirit of the great body of the people. In the present times, indeed, that martial spirit alone, and unsupported by a well disciplined standing army, would not, perhaps, be sufficient for the defence and security of any society. But where every citizen had the spirit of a soldier, a smaller standing army would surely be requisite. That spirit, besides, would necessarily diminish very much the dangers to liberty, whether real or imaginary, which are commonly apprehended from a standing army. As it would very much facilitate the operations of that army against a foreign invader, so it would obstruct them as much if unfortunately they should ever be directed against the constitution of the state.

Smith’s argument on the virtues of a martial spirit is the same as an argument sometimes offered today for the right to bear arms: It makes a large military less necessary and a military coup less likely to succeed. That is very nearly the opposite of what Rothbard implies. 

Rothbard continues:

“It is also important, opined Smith, to have government education in order to inculcate obedience to it among the populace — scarcely a libertarian or laissez-faire doctrine. Wrote Smith:

“An instructed and intelligent people besides are always more decent and orderly than an ignorant and stupid one. They feel themselves, each individually, more respectable, and more likely to obtain the respect of their lawful superiors, and they are therefore more disposed to respect those superiors. They are…less apt to be misled into any wanton or unnecessary opposition to the measures of government.”

Here is the full quote from Smith, in context and with Rothbard’s elision filled in and underlined:

The more they [the inferior ranks of people] are instructed, the less liable they are to the delusions of enthusiasm and superstition, which, among ignorant nations frequently occasion the most dreadful disorders. An instructed and intelligent people, besides, are always more decent and orderly than an ignorant and stupid one. They feel themselves, each individually, more respectable, and more likely to obtain the respect of their lawful superiors, and they are, therefore, more disposed to respect those superiors. They are more disposed to examine, and more capable of seeing through, the interested complaints of faction and sedition; and they are, upon that account, less apt to be misled into any wanton or unnecessary opposition to the measures of government⁷

Both the text that Rothbard elided and “wanton and unnecessary opposition” make it clear that the objective is not blind obedience but support for good policy and opposition to bad. 

So far, Rothbard’s account is consistent with either of two explanations, that he was deliberately misrepresenting Smith or that he had never read the book he was criticizing, merely skimmed it, or the internet,⁸ for quotes suited to his purposes. To see which explanation is more plausible, contrast his treatment of Smith with his treatment of Turgot. In the same book in which he attacks Smith he gives a consistently positive description of Turgot, describing him enthusiastically as a better economist than Smith sadly neglected by later authors while emphasizing his support for laissez-faire in a variety of contexts. He makes the same points in greater detail in his introduction to The Turgot Collection.

Having attacked Smith for his supposed support for a government role in education as a way of inculcating obedience to the government in the population, Rothbard says nothing about Turgot’s views on the subject. The following passage by Turgot is from a Memorial to the King of France included in the collection to which Rothbard wrote the introduction:

The first and the most important of all the institutions which I believe to be necessary, the one most fit to immortalize your Majesty’s reign, to have the most influence over the whole extent of the kingdom, is, Sire, the formation of a Council of National Education, under whose direction will be placed the academies, the universities, the colleges, and all the smaller schools. 

…

It would be the duty of one of the Councils to get composed a series of classic books, according to a regular plan, so that one would lead on to another, and that the study of the duties of the citizen, member of a family and of the State, might be the foundation of all other studies, which would be graduated in the order of utility they have for the State. 

The Council of National Education should supervise the whole machinery of education. … 

For what purpose?

I can propose nothing to you more advantageous for your people, more fit to maintain peace and good order, to give activity to all useful works, to make your authority to be cherished, to attach to you each day more and more the affections of your subjects, than to give to all of them an instruction which opens their mind to the obligations they have to society and to your power that protects them, the duty which these obligations impose, the self-interest that all have to fulfill these duties, for the public good and for their own.

Smith, writing as a professor, suggested that it would not be unjust to have the government subsidize part of the cost of basic education for the masses but might be better to leave education entirely in private hands. Turgot, then Finance Minister of France, advised the king to take complete control of the direction of “the whole machinery of education,” including writing the textbooks, in order to open his subjects’ minds to “the obligations they have to society and to your power that protects them.”

And it is Smith that Rothbard accuses of wanting government control of education in order to inculcate obedience to the government.

My 1998 summary of the Usenet argument

David Gordon’s piece

My Rebuttal

1. Murray Rothbard (2010), An Austrian Perspective on the History of Economic Thought, p. 467. Links to pdf and epub versions.

2. Adam Smith, The Wealth of Nations, Book V Chapter II, Article IV.

3. Readers unfamiliar with the distinction can find an explanation in Wikipedia.

4. “He [Smith] also favored moderate taxes on the import of foreign manufactures and taxes on the export of raw wool — thus gravely weakening his alleged devotion to freedom of international trade” Rothbard, op. cit.

5. Turgot defends this conclusion with the claim that everyone other than the landowner will be bargained down to subsistence, so have no surplus out of which to pay taxes. That sounds rather like the iron law of wages that appears, in varying form, in Smith, Malthus, and Ricardo, but Turgot says nothing at all about the effect of wages on population on which those theories are based. He seems to think that the mere fact that food is the most fundamental need will give the producer of food the upper hand, ignoring the fact that with multiple producers of food each must compete with the others in exchanging what he produces for the labor of his workers or the products of craftsmen.

6. The Glasgow Edition of the Works and Correspondence of Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations, Volume II, Book V Chapter 1, p. 815. 

A much more detailed critique by Scott Drylie of the claim that Smith favored public schooling.

7. Smith, Op. Cit., Book V, article II, p. 788.

8. Some of the quotes can be found online, used to argue that Smith was not really a wicked conservative (true) but a modern liberal or progressive (false). I discuss misrepresentation of Smith online in a recent article in Reason.