For A New Liberty - by Murray N. Rothbard

The libertarian creed emerged from the “classical liberal” movements of the seventeenth and eighteenth centuries in the Western world, specifically, from the English Revolution of the seventeenth century.

The object of the classical liberals was to bring about individual liberty in all of its interrelated aspects. In the economy, taxes were to be drastically reduced, controls and regulations eliminated, and human energy, enterprise, and markets set free to create and produce in exchanges that would benefit everyone and the mass of consumers. Entrepreneurs were to be free at last to compete, to develop, to create. The shackles of control were to be lifted from land, labor, and capital alike. Personal freedom and civil liberty were to be guaranteed against the depredations and tyranny of the king or his minions. Religion, the source of bloody wars for centuries when sects were battling for control of the State, was to be set free from State imposition or interference, so that all religions—or nonreligions—could coexist in peace. Peace, too, was the foreign policy credo of the new classical liberals; the age-old regime of imperial and State aggrandizement for power and pelf was to be replaced by a foreign policy of peace and free trade with all nations. And since war was seen as engendered by standing armies and navies, by military power always seeking expansion, these military establishments were to be replaced by voluntary local militia, by citizen-civilians who would only wish to fight in defense of their own particular homes and neighborhoods. Thus, the well-known theme of “separation of Church and State” was but one of many interrelated motifs that could be summed up as “separation of the economy from the State,” “separation of speech and press from the State,” “separation of land from the State,” “separation of war and military affairs from the State,” indeed, the separation of the State from virtually everything. The State, in short, was to be kept extremely small, with a very low, nearly negligible budget.

Socialism was a confused and hybrid movement because it tried to achieve the liberal goals of freedom, peace, and industrial harmony and growth—goals which can only be achieved through liberty and the separation of government from virtually everything—by imposing the old conservative means of statism, collectivism, and hierarchical privilege.


The libertarian creed rests upon one central axiom: that no man or group of men may aggress against the person or property of anyone else. This may be called the “nonaggression axiom.” “Aggression” is defined as the initiation of the use or threat of physical violence against the person or property of anyone else.

If no man may aggress against another; if, in short, everyone has the absolute right to be “free” from aggression, then this at once implies that the libertarian stands foursquare for what are generally known as “civil liberties”: the freedom to speak, publish, assemble, and to engage in such “victimless crimes” as pornography, sexual deviation, and prostitution (which the libertarian does not regard as “crimes” at all, since he defines a “crime” as violent invasion of someone else’s person or property).

The libertarian favors the right to unrestricted private property and free exchange; hence, a system of “laissez-faire capitalism.”

The most viable method of elaborating the natural-rights statement of the libertarian position is to divide it into parts, and to begin with the basic axiom of the “right to self-ownership.” The right to self-ownership asserts the absolute right of each man, by virtue of his (or her) being a human being, to “own” his or her own body; that is, to control that body free of coercive interference.


We have talked at length of individual rights; but what, it may be asked, of the “rights of society”? Don’t they supersede the rights of the mere individual? The libertarian, however, is an individualist; he believes that one of the prime errors in social theory is to treat “society” as if it were an actually existing entity. “Society” is sometimes treated as a superior or quasi-divine figure with overriding “rights” of its own; at other times as an existing evil which can be blamed for all the ills of the world. The individualist holds that only individuals exist, think, feel, choose, and act; and that “society” is not a living entity but simply a label for a set of interacting individuals.

The central core of the libertarian creed, then, is to establish the absolute right to private property of every man: first, in his own body, and second, in the previously unused natural resources which he first transforms by his labor. These two axioms, the right of self-ownership and the right to “homestead,” establish the complete set of principles of the libertarian system.


Libertarians regard the State as the supreme, the eternal, the best organized aggressor against the persons and property of the mass of the public.

The libertarian sees a crucial distinction between government, whether central, state, or local, and all other institutions in society. Or rather, two crucial distinctions. First, every other person or group receives its income by voluntary payment: either by voluntary contribution or gift (such as the local community chest or bridge club), or by voluntary purchase of its goods or services on the market (i.e., grocery store owner, baseball player, steel manufacturer, etc.). Only the government obtains its income by coercion and violence—i.e., by the direct threat of confiscation or imprisonment if payment is not forthcoming. This coerced levy is “taxation.”

A second distinction is that, apart from criminal outlaws, only the government can use its funds to commit violence against its own or any other subjects; only the government can prohibit pornography, compel a religious observance, or put people in jail for selling goods at a higher price than the government deems fit. Both distinctions, of course, can be summed up as: only the government, in society, is empowered to aggress against the property rights of its subjects, whether to extract revenue, to impose its moral code, or to kill those with whom it disagrees.

Another critical distinction of the State is that it compels the monopolization of the service of protection; the State arrogates to itself a virtual monopoly of violence and of ultimate decision-making in society.


Since the early origins of the State, its rulers have always turned, as a necessary bolster to their rule, to an alliance with society’s class of intellectuals. The masses do not create their own abstract ideas, or indeed think through these ideas independently; they follow passively the ideas adopted and promulgated by the body of intellectuals, who become the effective “opinion moulders” in society. And since it is precisely a moulding of opinion on behalf of the rulers that the State almost desperately needs, this forms a firm basis for the age-old alliance of the intellectuals and the ruling classes of the State. The alliance is based on a quid pro quo: on the one hand, the intellectuals spread among the masses the idea that the State and its rulers are wise, good, sometimes divine, and at the very least inevitable and better than any conceivable alternatives. In return for this panoply of ideology, the State incorporates the intellectuals as part of the ruling elite, granting them power, status, prestige, and material security. Furthermore, intellectuals are needed to staff the bureaucracy and to “plan” the economy and society.

The intellectual arguments used by the State throughout history to “engineer consent” by the public can be classified into two parts: (1) that rule by the existing government is inevitable, absolutely necessary, and far better than the indescribable evils that would ensue upon its downfall; and (2) that the State rulers are especially great, wise, and altruistic men—far greater, wiser, and better than their simple subjects. In former times, the latter argument took the form of rule by “divine right” or by the “divine ruler” himself, or by an “aristocracy” of men. In modern times, as we indicated earlier, this argument stresses not so much divine approval as rule by a wise guild of “scientific experts” especially endowed in knowledge of statesmanship and the arcane facts of the world. The increasing use of scientific jargon, especially in the social sciences, has permitted intellectuals to weave apologia for State rule which rival the ancient priestcraft in obscurantism.



To the libertarian, the arguments between conservatives and liberals over laws prohibiting pornography are distressingly beside the point. The conservative position tends to hold that pornography is debasing and immoral and therefore should be outlawed. Liberals tend to counter that sex is good and healthy and that therefore pornography will only have good effects, and that depictions of violence—say on television, in movies, or in comic books—should be outlawed instead. Neither side deals with the crucial point: that the good, bad, or indifferent consequences of pornography, while perhaps an interesting problem in its own right, is completely irrelevant to the question of whether or not it should be outlawed. The libertarian holds that it is not the business of the law—the use of retaliatory violence—to enforce anyone’s conception of morality. It is not the business of the law—even if this were practically possible, which is, of course, most unlikely—to make anyone good or reverent or moral or clean or upright. This is for each individual to decide for himself. It is only the business of legal violence to defend people against the use of violence, to defend them from violent invasions of their person or property. But if the government presumes to outlaw pornography, it itself becomes the genuine outlaw—for it is invading the property rights of people to produce, sell, buy, or possess pornographic material.

We do not pass laws to make people upright; we do not pass laws to force people to be kind to their neighbors or not to yell at the bus driver; we do not pass laws to force people to be honest with their loved ones. We do not pass laws to force them to eat X amount of vitamins per day. Neither is it the business of government, nor of any legal agency, to pass laws against the voluntary production or sale of pornography. Whether pornography is good, bad, or indifferent should be of no interest to the legal authorities.

The irony, of course, is that by forcing men to be “moral”—i.e., to act morally—the conservative or liberal jailkeepers would in reality deprive men of the very possibility of being moral. The concept of “morality” makes no sense unless the moral act is freely chosen.


A crucial fallacy of the middle-class school worshippers is confusion between formal schooling and education in general. Education is a lifelong process of learning, and learning takes place not only in school, but in all areas of life. When the child plays, or listens to parents or friends, or reads a newspaper, or works at a job, he or she is becoming educated. Formal schooling is only a small part of the educational process, and is really only suitable for formal subjects of instruction, particularly in the more advanced and systematic subjects. The elementary subjects, reading, writing, arithmetic and their corollaries, can easily be learned at home and outside the school.

Furthermore, one of the great glories of mankind is its diversity, the fact that each individual is unique, with unique abilities, interests, and aptitudes. To coerce into formal schooling children who have neither the ability nor the interest in this area is a criminal warping of the soul and mind of the child. Paul Goodman has raised the cry that most children would be far better off if they were allowed to work at an early age, learn a trade, and begin to do that which they are most suited for.

It is important to realize that the very nature of the public school requires the imposition of uniformity and the stamping out of diversity and individuality in education. For it is in the nature of any governmental bureaucracy to live by a set of rules, and to impose those rules in a uniform and heavy-handed manner.


Inflation is not ineluctably built into the economy, nor is it a prerequisite for a growing and thriving world. During most of the nineteenth century (apart from the years of the War of 1812 and the Civil War), prices were falling, and yet the economy was growing and industrializing. Falling prices put no damper whatsoever on business or economic prosperity.

All prices are determined inversely by the supply of the good and directly by the demand for it. But the supplies of goods are, in general, going up year after year in our still growing economy. So that, from the point of view of the supply side of the equation, most prices should be falling, and we should right now be experiencing a nineteenth-century-style steady fall in prices (“deflation”). If chronic inflation were due to the supply side—to activities by producers such as business firms or unions—then the supply of goods overall would necessarily be falling, thereby raising prices. But since the supply of goods is manifestly increasing, the source of inflation must be the demand side—and the dominant factor on the demand side, as we have indicated, is the total supply of money.

And, indeed, if we look at the world past and present, we find that the money supply has been going up at a rapid pace. It rose in the nineteenth century, too, but at a much slower pace, far slower than the increase of goods and services; but, since World War II, the increase in the money supply—both here and abroad—has been much faster than in the supply of goods. Hence, inflation.

The best money-commodities are those that are in high demand; that have a high value per unit-weight; that are durable, so they can be stored a long time, mobile, so they can be moved readily from one place to another, and easily recognizable; and that can be readily divisible into small parts without losing their value.

When a society or a country comes to adopt a certain commodity as a money, and its unit of weight then becomes the unit of currency—the unit of reckoning in everyday life—then that country is said to be on that particular commodity “standard.” Since markets have universally found gold or silver to be the best standards whenever they are available, the natural course of these economies is to be on the gold or silver standard. In that case, the supply of gold is determined by market forces: by the technological conditions of supply, the prices of other commodities, etc.

Just as the State arrogates to itself a monopoly power over legalized kidnapping and calls it conscription; just as it has acquired a monopoly over legalized robbery and calls it taxation; so, too, it has acquired the monopoly power to counterfeit and calls it increasing the supply of dollars (or francs, marks, or whatever). Instead of a gold standard, instead of a money that emerges from and whose supply is determined by the free market, we are living under a fiat paper standard. That is, the dollar, franc, etc., are simply pieces of paper with such names stamped upon them, issued at will by the central government—by the State apparatus.

Furthermore, since the interest of a counterfeiter is to print as much money as he can get away with, so too will the State print as much money as it can get away with, just as it will employ the power to tax in the same way: to extract as much money as it can without raising too many howls of protest. Government control of money supply is inherently inflationary, then, for the same reason that any system in which a group of people obtains control over the printing of money is bound to be inflationary.


Inflating by simply printing more money, however, is now considered old-fashioned. For one thing, it is too visible; with a lot of high-denomination bills floating around, the public might get the troublesome idea that the cause of the unwelcome inflation is the government’s printing of all the bills—and the government might be stripped of that power. Instead, governments have come up with a much more complex and sophisticated, and much less visible, means of doing the same thing: of organizing increases in the money supply to give themselves more money to spend and to subsidize favored political groups. The idea was this: instead of stressing the printing of money, retain the paper dollars or marks or francs as the basic money (the “legal tender”), and then pyramid on top of that a mysterious and invisible, but no less potent, “checkbook money,” or bank demand deposits. The result is an inflationary engine, controlled by government, which no one but bankers, economists, and government central bankers understands—and designedly so.

So here we have, at long last, the key to the mystery of the modern inflationary process. It is a process of continually expanding the money supply through continuing Fed purchases of government securities on the open market. Let the Fed wish to increase the money supply by $6 billion, and it will purchase government securities on the open market to a total of $1 billion (if the money multiplier of demand deposits/reserves is 6:1) and the goal will be speedily accomplished.

The monetary history of this century has been one of repeated loosening of restraints on the State’s propensity to inflate, the removal of one check after another until now the government is able to inflate the money supply, and therefore prices, at will.

There is, of course, a crucial difference between gold and Federal Reserve Notes. The government cannot create new gold at will. Gold has to be dug, in a costly process, out of the ground. But Federal Reserve Notes can be issued at will, at virtually zero cost in resources. In 1933, the United States government removed the gold restraint on its inflationary potential by shifting to fiat money: to making the paper dollar itself the standard of money, with government the monopoly supplier of dollars. It was going off the gold standard that paved the way for the mighty U.S. money and price inflation during and after World War II.


There is no reason to expect boom-bust cycles in the overall economy. In fact, there is reason to expect just the opposite; for usually the free market works smoothly and efficiently, and especially with no massive cluster of error such as becomes evident when boom turns suddenly to bust and severe losses are incurred. And indeed, before the late eighteenth century there were no such overall cycles.

The depression is the process by which the market economy adjusts, throws off the excesses and distortions of the inflationary boom, and reestablishes a sound economic condition. The depression is the unpleasant but necessary reaction to the distortions and excesses of the previous boom. The depression is the painful but necessary process by which the free market rids itself of the excesses and errors of the boom and reestablishes the market economy in its function of efficient service to the mass of consumers.

What then are the policy conclusions that arise rapidly and easily from the Austrian analysis of the business cycle? They are the precise opposite from those of the Keynesian establishment. For, since the virus of distortion of production and prices stems from inflationary bank credit expansion, the Austrian prescription for the business cycle will be:

First, if we are in a boom period, the government and its banks must cease inflating immediately. It is true that this cessation of artificial stimulant will inevitably bring the inflationary boom to an end, and will inaugurate the inevitable recession or depression. But the longer the government delays this process, the harsher the necessary readjustments will have to be. For the sooner the depression readjustment is gotten over with, the better. This also means that the government must never try to delay the depression process; the depression must be allowed to work itself out as quickly as possible, so that real recovery can begin. This means, too, that the government must particularly avoid any of the interventions so dear to Keynesian hearts. It must never try to prop up unsound business situations; it must never bail out or lend money to business firms in trouble. For doing so will simply prolong the agony and convert a sharp and quick depression phase into a lingering and chronic disease. The government must never try to prop up wage rates or prices, especially in the capital goods industries; doing so will prolong and delay indefinitely the completion of the depression adjustment process.

The government must not try to inflate again in order to get out of the depression. For even if this reinflation succeeds (which is by no means assured), it will only sow greater trouble and more prolonged and renewed depression later on. The government must do nothing to encourage consumption, and it must not increase its own expenditures, for this will further increase the social consumption/investment ratio—when the only thing that could speed up the adjustment process is to lower the consumption/savings ratio so that more of the currently unsound investments will become validated and become economic.

Thus, what the government should do, according to the Austrian analysis of the depression and the business cycle, is absolutely nothing. It should stop its own inflating, and then it should maintain a strict hands-off, laissez-faire policy. Anything it does will delay and obstruct the adjustment processes of the market; the less it does, the more rapidly will the market adjustment process do its work and sound economic recovery ensue.


Government, in the United States and elsewhere, for centuries and seemingly from time immemorial has been supplying us with certain essential and necessary services, services which nearly everyone concedes are important: defense (including army, police, judicial, and legal), firefighting, streets and roads, water, sewage and garbage disposal, postal service, etc. So identified has the State become in the public mind with the provision of these services that an attack on State financing appears to many people as an attack on the service itself. Thus if one maintains that the State should not supply court services, and that private enterprise on the market could supply such service more efficiently as well as more morally, people tend to think of this as denying the importance of courts themselves.

The advocate of a free market in anything cannot provide a “constructive” blueprint of such a market in advance. The essence and the glory of the free market is that individual firms and businesses, competing on the market, provide an ever-changing orchestration of efficient and progressive goods and services: continually improving products and markets, advancing technology, cutting costs, and meeting changing consumer demands as swiftly and as efficiently as possible. The libertarian economist can try to offer a few guidelines on how markets might develop where they are now prevented or restricted from developing; but he can do little more than point the way toward freedom, to call for government to get out of the way of the productive and ever-inventive energies of the public as expressed in voluntary market activity. No one can predict the number of firms, the size of each firm, the pricing policies, etc., of any future market in any service or commodity. We just know—by economic theory and by historical insight—that such a free market will do the job infinitely better than the compulsory monopoly of bureaucratic government.

On the free market, in short, the consumer is king, and any business firm that wants to make profits and avoid losses tries its best to serve the consumer as efficiently and at as low a cost as possible. In a government operation, in contrast, everything changes. Inherent in all government operation is a grave and fatal split between service and payment, between the providing of a service and the payment for receiving it. The government bureau does not get its income as does the private firm, from serving the consumer well or from consumer purchases of its products exceeding its costs of operation. No, the government bureau acquires its income from mulcting the long-suffering taxpayer. Its operations therefore become inefficient, and costs zoom, since government bureaus need not worry about losses or bankruptcy; they can make up their losses by additional extractions from the public till.

The proper counter-argument to the political demand for more tax money is the question: “How is it that private enterprise doesn’t have these problems?” How is it that hi-fi manufacturers or photocopy companies or computer firms or whatever do not have trouble finding capital to expand their output? Why don’t they issue manifestos denouncing the investing public for not providing them with more money to serve consumer needs? The answer is that consumers pay for the hi-fi sets or the photocopy machines or the computers, and that investors, as a result, know that they can make money by investing in those businesses. On the private market, firms that successfully serve the public find it easy to obtain capital for expansion; inefficient, unsuccessful firms do not, and eventually have to go out of business. But there is no profit-and-loss mechanism in government to induce investment in efficient operations and to penalize and drive the inefficient or obsolete ones out of business. There are no profits or losses in government operations inducing either expansion or contraction of operations. In government, then, no one truly “invests,” and no one can insure that successful operations will expand and unsuccessful ones disappear. In contrast, government must raise its “capital” by literally conscripting it through the coercive mechanism of taxation.

One of the reasons that private firms are models of efficiency is because the free market establishes prices which permit them to calculate, to figure out what their costs are and therefore what they must do to make profits and avoid losses. It is through this price system, as well as through the motivation to increase profits and avoid losses, that goods and services are properly allocated in the market among all the intricate branches and areas of production that make up the modern industrial “capitalist” economy. It is economic calculation that makes this marvel possible; in contrast, central planning, such as is attempted under socialism, is deprived of accurate pricing, and therefore cannot calculate costs and prices. This is the major reason that central socialist planning has increasingly proved to be a failure as the communist countries have become industrialized.

The ultimate libertarian program may be summed up in one phrase: the abolition of the public sector, the conversion of all operations and services performed by the government into activities performed voluntarily by the private-enterprise economy.


The government only knows that it has a limited budget. Its allocations of funds are then subject to the full play of politics, boondoggling, and bureaucratic inefficiency, with no indication at all as to whether the police department is serving the consumers in a way responsive to their desires or whether it is doing so efficiently. The situation would be different if police services were supplied on a free, competitive market. In that case, consumers would pay for whatever degree of protection they wish to purchase. The consumers who just want to see a policeman once in a while would pay less than those who want continuous patrolling, and far less than those who demand 24-hour bodyguard service. On the free market, protection would be supplied in proportion and in whatever way that the consumers wish to pay for it. A drive for efficiency would be insured, as it always is on the market, by the compulsion to make profits and avoid losses, and thereby to keep costs low and to serve the highest demands of the consumers. Any police firm that suffers from gross inefficiency would soon go bankrupt and disappear.

The legal code, simply, would insist on the libertarian principle of no aggression against person or property, define property rights in accordance with libertarian principle, set up rules of evidence (such as currently apply) in deciding who are the wrongdoers in any dispute, and set up a code of maximum punishment for any particular crime. Within the framework of such a code, the particular courts would compete on the most efficient procedures, and the market would then decide whether judges, juries, etc., are the most efficient methods of providing judicial services.


Pending the dissolution of States, libertarians desire to limit, to whittle down, the area of government power in all directions and as much as possible. We have already demonstrated how this principle of “de-statizing” might work in various important “domestic” problems, where the goal is to push back the role of government and to allow the voluntary and spontaneous energies of free persons full scope through peaceful interaction, notably in the free-market economy. In foreign affairs, the goal is the same: to keep government from interfering in the affairs of other governments or other countries. Political “isolationism” and peaceful coexistence—refraining from acting upon other countries—is, then, the libertarian counterpart to agitating for laissez-faire policies at home. The idea is to shackle government from acting abroad just as we try to shackle government at home. Isolationism or peaceful coexistence is the foreign policy counterpart of severely limiting government at home.

War, in the words of the libertarian Randolph Bourne, “is the health of the State.” War has always been the occasion of a great—and usually permanent—acceleration and intensification of State power over society. War is the great excuse for mobilizing all the energies and resources of the nation, in the name of patriotic rhetoric, under the aegis and dictation of the State apparatus. It is in war that the State really comes into its own: swelling in power, in number, in pride, in absolute dominion over the economy and the society. Society becomes a herd, seeking to kill its alleged enemies, rooting out and suppressing all dissent from the official war effort, happily betraying truth for the supposed public interest. Society becomes an armed camp, with the values and the morals—as the libertarian Albert Jay Nock once phrased it—of an “army on the march.”


Cleaving to principle means something more than holding high and not contradicting the ultimate libertarian ideal. It also means striving to achieve that ultimate goal as rapidly as is physically possible. In short, the libertarian must never advocate or prefer a gradual, as opposed to an immediate and rapid, approach to his goal. For by doing so, he undercuts the overriding importance of his own goals and principles. And if he himself values his own goals so lightly, how highly will others value them?

While it is vital for the libertarian to hold his ultimate and “extreme” ideal aloft, this does not, contrary to Hayek, make him a “utopian.” In short, the term “utopian” in popular parlance confuses two kinds of obstacles in the path of a program radically different from the status quo. One is that it violates the nature of man and of the world and therefore could not work once it was put into effect. This is the utopianism of communism. The second is the difficulty in convincing enough people that the program should be adopted. The former is a bad theory because it violates the nature of man; the latter is simply a problem of human will, of convincing enough people of the rightness of the doctrine. “Utopian” in its common pejorative sense applies only to the former. In the deepest sense, then, the libertarian doctrine is not utopian but eminently realistic, because it is the only theory that is really consistent with the nature of man and the world. The libertarian does not deny the variety and diversity of man, he glories in it and seeks to give that diversity full expression in a world of complete freedom. And in doing so, he also brings about an enormous increase in productivity and in the living standards of everyone, an eminently “practical” result generally scorned by true utopians as evil “materialism.”

The case for libertarian optimism can be made in a series of what might be called concentric circles, beginning with the broadest and longest-run considerations and moving to the sharpest focus on short-run trends. In the broadest and longest-run sense, libertarianism will win eventually because it and only it is compatible with the nature of man and of the world. Only liberty can achieve man’s prosperity, fulfillment, and happiness. In short, libertarianism will win because it is true, because it is the correct policy for mankind, and truth will eventually win out.

Economic science has shown, as we have partially demonstrated in this book, that only freedom and a free market can run an industrial economy. In short, while a free economy and a free society would be desirable and just in a preindustrial world, in an industrial world it is also a vital necessity. For, as Ludwig von Mises and other economists have shown, in an industrial economy statism simply does not work. Hence, given a universal commitment to an industrial world, it will eventually—and a much sooner “eventually” than the simple emergence of truth—become clear that the world will have to adopt freedom and the free market as the requisite for industry to survive and flourish.