Rothbard on Consumer Sovereignty and His Implicit Rejection of Mises’s Economics

Ludwig von Mises made consumer sovereignty the foundation of his elucidation of market interaction. An exception to consumer sovereignty is the monopoly price, which can be wasteful. Murray Rothbard rejected consumer sovereignty in favor of the concept of individual sovereignty. He proceeded to build his own elucidation of market interaction on the basis of the latter concept. In this theory, monopoly prices are not wasteful. This seemingly minor difference between the two Austrian economists can be traced to a pivotal and crucial difference in fundamental assumptions about the nature and purpose of economics. Mises sought to create a value-free economics based on the assumption that readers accept the classical and early neoclassical assumption that people benefit from the division of labor and from its further extension. Rothbard sought to create a ethics-based economics, founded on the assumption that the individual is sovereign and on a welfare function of “demonstrated preference.” The difference in the goals of the two authors is reflected by a difference in their definitions of private property rights and of the pure, unhampered market economy. Mises defined such an economy as containing a complete set of private property rights. In such an economy external effect