Dr. Robert P. Murphy is a senior fellow at the Mises Institute and a professor of economics at Texas Tech University. 71 Republic’s Mason Mohon sat down with Dr. Murphy to discuss economics and anarcho-capitalism. You can find Dr. Murphy on Twitter @BobMurphyEcon.
Mason Mohon: Today we’re here at Mises University with Dr. Bob Murphy. He’s going to be talking about economics, socialism, free-market anarchy, and various things dealing with the free market. Thanks for sitting down with me today.
Dr. Robert Murphy: Thanks for having me.
Mohon: So first off, I’m wondering: why do you think so many young people are embracing socialism?
Murphy: Well, I think it’s understandable that younger people today they know the current system (the United States and Europe as well), Something’s fundamentally wrong with it. And they know it’s a deep rot. I think they’re just misdiagnosing what the problem is. So they’re looking at this hybrid between capitalism and state tyranny, let’s call it, and it results in the system of corporatism.
They’re looking at it saying, “Oh, yes, that’s because the vestiges of capitalism are still there and running the system, we need to stamp that out in a government that’s democratically controlled, and not beholden to big corporate interests. That will finally give prosperity and freedom to the masses.”
Of course, I would look at it and say, no, it’s the government involvement. That’s the problem: if these corporations were facing genuine market forces, they would be kept in check. And they would be serving their customers instead of stealing your data and building weapons of destruction.
Mohon: Makes sense. We look at history and we look at the 20th century, and there are clearly many disasters of central planning. Why don’t you think these have an impact on the students?
Murphy: Here, I’m more sympathetic than I think a lot of other fans of the free market are. The way they deal with it is they inoculate themselves, as they’ll look at like Stalin and say, oh, that’s not what we mean. That’s not democratic socialism that got out of hand and you just got to have the right people in charge. Or they’ll say that that wasn’t true socialism or true communism. They have excuses.
So to us fans of the free market, that seems like willful ignorance. But on the other hand, I can see how from their perspective, they’re going to say, look at the Great Depression, the crisis of 2008, what more do you need to see to know that capitalism doesn’t work?
And so what do we say? “Oh, that’s not what we mean. That’s not true, free-market capitalist.” So we have the same rhetorical moves on the things that ostensibly are embarrassments to us. I think our theory is more sound. Nobody has ever lived up to the Rothbard ideal of a free society, and no society has ever lived up to probably what Marx and Engels would have thought is the ideal communist one.
But in practice, if you look at those societies that are closest to pure capitalism, they’re wealthy and free. If you look at those societies that are closest to pure communism, they’re totalitarian hellholes. So it’s not merely saying “my system hasn’t been tried”. I’m saying, the more it’s been approximated, the better it clearly is by any account. Make sense?
Mohon: Yes. So from the Austrian perspective, what are the major pitfalls of socialism?
Murphy: Everybody knows the problems of socialism, such as the incentive problem. Hey, if people aren’t being rewarded according to their contribution, nobody wants to do the really dirty jobs. Who wants to be the garbage collector in a socialist utopia.
Also, the fact that power corrupts. That’s a problem too. But what the Austrians brought to the table was this novel argument that Ludwig von Mises put forward where he said the chief fundamental problem of socialism, even if you assume good intentions, even if you assume the central planners had all the relevant technical knowledge at their disposal, still, they wouldn’t know the economic costs of various factors of production.
So they could make a bunch of products for their citizens. And they could know how many tons of steel and how much rubber, how much glass went into it. But at the end of the day, they were wouldn’t be able to say “was that a good use of our scarce resources?” They would have no way even ex-post of investigating, whereas, in a market economy, it’s ultimately profit and loss. That’s how each firm gets a handle on “are we contributing? are we creating things that are more valuable than what we’re using up?” That’s what the accountant tells the owner of the firm.
Mohon: Kind of to transition here and discuss socialism a little less and the other side of the coin free-market anarchy a little more: What are some of the most common misconceptions you see about how a completely free-market state-free system would work?
Murphy: I think the biggest misconception is when people hear the word anarchy, and perhaps this is understandable, they think it means no rules. They think it means chaos, and people running around just slaughtering each other. And there’s no systematic way that society sort of minimizes anti-social behavior. That’s what some people think anarchy means is by definition no rules.
That’s not the sense in which Rothbardians are champions of anarchy. For them, anarchy, of course, just means no political ruler, like monarchies. The rule by one anarchy is the rule by no one. But it doesn’t mean there’s there’s no rules whatsoever. Even in a monarchy, there are all sorts of rules that people obey in terms of crossing the street, or there’s rules of grammar, things like that, that is not all flowing from the king. And likewise, in a free society that we would call anarchist, there would still be laws and it would still be illegal to kill somebody.
Mohon: Right. So we look at a major detraction made towards free-market anarchy. People say, “Oh, if there’s no government, then these corporations are going to be in charge and one will get bigger and bigger,” kind of similar to Nozick’s argument, but they take a more malicious view of it. It’ll get bigger until it’s a monopolized corporation that can just exploit everybody. It’s one of the most basic strawmen. But is it accurate or not?
Murphy: What I like to do with that argument is, even on its own terms, they’re arguing that, “oh, we should have a state, there’s one agency that’s in charge of everyone and can take your money on your paycheck against your will and controls most of the guns and can put you in cages, if you cross it, that we need to have this organization because otherwise, a corporation might over time become as powerful as the thing we just described.”
So let’s just take the anxiety out of it and just give us the worst thing right off the bat. That’s how the response would be for the people who are pro-politics or pro-state. They would say, “Oh, well, we’ve established this coercive institution that has a monopoly on the lawful use of violence. If we create it through democratic procedures, we can control it.” I just think that’s very naive.
History shows no state has respected its original founding boundaries. In the very arguments that make people think the clientele of an aggressive Defense Agency would tolerate it growing and using violence against its competitors to enlarge itself customer base, if its clientele would be willing to go along with it, well, then those people would also not restrain a state. So it’s kind of like turning trying to have it both ways. So I agree. It is possible a corporation could grow and take over, but by the same token, the people that would allow that to happen on their watch, are going to be sitting ducks for a state because the state has all the advantage of the corporation plus a whole lot more.
Mohon: Makes perfect sense. It’s almost as if their strawman is the status quo.
Murphy: At best, yeah.
Mohon: One of my last questions is going to be when it comes to the actual functions that government provides right now. You just gave a talk a few minutes ago about “this is something the government does or something that people think the government does that can be done better in the free market.” What do you think is like the number one function of the government provides right now that people can understand the free market providing?
Murphy: Well, for sure the two that I think would come to mind the most for people would be military, defense and police services, or they might say the legal system. Conceptually though, I think that the judicial system is the single hardest one. If you understand where property titles come from, and you’re okay with that, the actual provision of military defense, I don’t think is that difficult of a problem. Whereas how could you have a rule of law if there’s no one organization in charge of issuing the laws? That does seem tricky. So to me, that is the fundamental stumbling block is people, Ayn Rand included, thought that you need to have a political system in order to issue the rules that we’re all going to follow. For anarchist theorists and the Rothbardian vein, that’s the most fundamental problem to explain.
Mohon: And that’s why people should read Chaos Theory.
Murphy: I encourage them to do so.
Mohon: On the topic of books (this will be the last question), three recommended books.
Murphy: On the stuff we’ve been talking about?
Mohon: Just in general. Jeff Deist recommended fiction, Democracy, and a movie.
Murphy: Catch 22 is a hilarious novel that I think will resonate with your followers. Murray Rothbard’s What Has the Government Done to Our Money. That’s a good one. For outside reading, something you might not normally encounter is Steve Landsberg’s The Armchair Economist. It’s a Chicago School type approach, but it might supplement the Austrian foundation that I’m assuming your followers have.
Mohon: Perfect. Thanks for sitting down with us.
Murphy: Thanks for having me.
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