The Essential Rothbard - Ludwig von Mises Institute

84 The Essential Rothbard
North (who realizes that regions are as important an economic
unit as the politically artificial “nation”) talks of
“regions” tied to one export. And yet how big or small is a
“region”? “Region” is an economically meaningless term, as
we can make the “region” small enough so that it could
never have more than one export commodity. And yet this
does not make such a region poor or underdeveloped. 230
Errors in theory have grave consequences:
The logic of North’s position, which apparently he does not
carry through, is basically protectionist; industry is weighted
more highly than other goods, exports more highly than
other industries, etc. . . . So protection minded is North that
he actually says that an export commodity which requires
more investment in capital facilities, etc. is better and more
conducive to growth than one requiring less, because there
will be more spending on home port facilities, etc. This again
is protectionistic nonsense. 231
Rothbard is careful to add that North himself does not draw the
policy implications of his own analysis; he does not state a position
about protective tariffs. What interests Rothbard, though, is the
logic of the argument: here, he says, is where one will be pushed to
go, if one falls into this fallacy.
But why is it a fallacy? Rothbard identifies the basic Keynesian
error:
it [North’s argument’s on capital investment] claims that a
less efficient, and less productive industry is better than a
more efficient and more productive because more money is
spent by the former on costs, resources, etc. Isn’t the money
that is saved ever used? 232
Beneath this Keynesian fallacy lies a deeper failing. Keynesian
reasoning is just one example of an attempt to “force” the market.
230 Ibid.
231 Ibid.
232 Ibid.