Murray N. Rothbard on Melvin M. Leiman’s Jacob N. Cardozo

Murray N. Rothbard’s June 1968 book review welcomes Melvin M. Leiman’s study of Jacob N. Cardozo as a contribution to the neglected history of antebellum American economic thought. Its importance lies partly in recovering American economists whose analytical sophistication could rival that of their better-known English contemporaries. Rothbard combines appreciation of Leiman’s historical approach with criticisms of his treatment of theoretical validity, banking freedom, and slavery’s profitability.

Rothbard praises Leiman for connecting Cardozo’s economic analysis with his positions on contemporary political and economic questions. This approach corrects a tendency among historians of economics to privilege formal theory over policy arguments—a tendency Rothbard associates with modern economics’ aspiration to mathematical exactness. Policy views are substantive components of an economist’s thought, not merely background to analytical achievements.

Yet contextual explanation can itself become reductive. Leiman’s account of Cardozo’s changing banking theories sometimes treats theoretical shifts as responses to changing institutions without adequately asking whether those theories were sound. Rothbard states the methodological distinction directly:

Institutional conditions, however, do not give rise to theories like so many reflections in a mirror; many competing theories can be used to interpret any given condition, and these theories must be weighed on their own grounds for inner truth or error.

Historical circumstances may explain why an economist adopted an argument, but they cannot establish its validity. Cardozo’s vacillations might consequently reveal theoretical confusion rather than a series of equally defensible adaptations. Rothbard’s objection concerns the relation between historical explanation and independent analytical judgment, not the usefulness of institutional history itself.

He nevertheless credits Leiman with recognizing Cardozo’s theoretical contributions, especially his corrections to Ricardian rent and distribution theory. Cardozo distinguished monetary returns from real returns: money wages and profits could fall in an advancing capitalist economy while real wages and profits rose. This example supports Rothbard’s broader contention that early American economics deserves attention for its analytical insights as well as its local political setting.

The review then challenges Leiman’s terminology in monetary history:

Leiman’s definition of “laissez faire” in banking theory is an odd one; for him, the “laissez-faire” policy was the anti-bullionist desire to remove the necessity for banks to redeem their liabilities in specie.

For Rothbard, exemption from specie redemption is not straightforwardly an expression of economic freedom. It permits banks to avoid contractual obligations, whereas laissez-faire ordinarily requires their fulfillment. The disagreement therefore turns on whether freedom in banking means freedom from intervention or includes privileges allowing nonperformance of contracts. Rothbard also disputes Leiman’s claim that American economists lagged alongside their English counterparts in recognizing deposits as part of the money supply. He identifies Condy Raguet, Daniel Raymond, William M. Gouge, and Charles Holt Carroll as more advanced on this question than English Currency School economists.

Finally, Rothbard welcomes Leiman’s criticism of the Conrad-Meyer analysis of slavery’s profitability while identifying further questions. Expected returns could be capitalized into slave prices, bringing investment yields into line with those of other industries. Compulsory county patrols also allowed slaveholders to transfer policing costs to the public. Rothbard asks why slavery did not decline through arrangements permitting enslaved people to purchase freedom above market value, invoking ancient Greece and Rome as contrasts. These remain criticisms and questions rather than a developed alternative explanation. Across the review, his governing concern is that historical recovery must combine institutional context with scrutiny of theoretical claims, contractual obligations, and the allocation of economic costs.