Refutation of Tabarrok’s Criticism of Reisman

This is a critical response to Alexander Tabarrok regarding his debate with George Reisman regarding the merits of Reisman’s book Capitalism: A Treatise on Economics. As context: it’s an internal debate between Austrian economists from 1997-8, and Reisman is an Objectivist as well.

The debate began with Review of Capitalism: A Complete and Integrated Understanding of the Nature and Value of Human Economic Life. It’s a critical, negative review by Tabarrok (who denies it’s negative because he praised some ideas, but he also claimed e.g. that one of Reisman’s main themes throughout the book is “fundamentally misguided”).

Reisman replied in Reisman on Capitalism. I regard this article as refuting Tabarrok's review. Reisman's concluding paragraph summarizes:

In this response, I have dealt with five instances of misrepresentation in the review: its claim that I ignore the essential theme of support for businessmen and capitalists, its misrepresentation of my use of classical economics' concept of demand and supply, its distortion of my definition of economics, its misrepresentation of my views on time preference as a determinant of the rate of profit and interest, and finally, its denial of my contributions to aggregate economic accounting and "macroeconomics." These five instances are merely a good sample. [...]

Tabarrok replied briefly in Response to Reisman on Capitalism. That concludes the original debate.

I’ll now respond by pointing out major errors in Tabarrok’s response, thereby vindicating Reisman’s response and his Capitalism. Here’s Tabarrok’s first paragraph:

Reisman's Capitalism is longer than either Mises's Human Action or Rothbard's Man, Economy, and State. It thus seems unreasonable to object to my review because it ignores major portions of his work. Reisman's other objections are similarly weak.

Reisman didn’t make that objection. Rather than criticizing Tabarrok for ignoring (omitting) some topics in the original review, Reisman criticized Tabarrok for misrepresentation. Tabarrok didn’t just fail to discuss some parts of the book; he made incorrect claims about the contents of the book.

Tabarrok repeats one of his misrepresentations in his next sentence:

Capitalism has surprisingly little to say on entrepreneurship or other typically Austrian and Objectivist themes.

Tabarrok made that claim in his first review, too. The problems are that it’s incorrect and that Reisman already refuted it in his response. Nevertheless, Tabarrok repeats the point without engaging with Reisman’s arguments.

Tabarrok’s original argument was that “there is no index entry for entrepreneurship”, plus he didn’t find those themes when reading Capitalism. It’s true that Reisman didn’t say much about the word “entrepreneurship”, but that’s because he used synonyms. He used the words “businessmen” and “businessman” a combined 678 times, and he talked extensively about capitalists. Reisman had already informed Tabarrok of this, but somehow Tabarrok didn’t reconsider.

To show Reisman really did cover this theme, I’ll list some of the section titles found in the table of contents of Capitalism. I think they're adequate to make the point, but if you have doubts about which side of this debate is correct, read some of these sections and see for yourself.

The Benefit from Geniuses
The General Benefit from Reducing Taxes on the “Rich”
The Pyramid-of-Ability Principle
Productive Activity and Moneymaking
The Productive Role Of Businessmen And Capitalists
- 1. The Productive Functions of Businessmen and Capitalists
  - Creation of Division of Labor
  - Coordination of the Division of Labor
  - Improvements in the Efficiency of the Division of Labor
- 2. The Productive Role of Financial Markets and Financial Institutions
  - The Specific Productive Role of the Stock Market
- 3. The Productive Role of Retailing and Wholesaling
- 4. The Productive Role of Advertising
Smith’s Failure to See the Productive Role of Businessmen and Capitalists and of the Private Ownership of Land
A Rebuttal to Smith and Marx Based on Classical Economics: Profits, Not Wages, as the Original and Primary Form of Income
Further Rebuttal: Profits Attributable to the Labor of Businessmen and Capitalists Despite Their Variation With the Size of the Capital Invested
The “Macroeconomic” Dependence of the Consumers on Business

My conclusions are that Tabarrok is mistaken, that Reisman’s Capitalism is a great book, and that no major criticisms of Capitalism exist.

Reisman may be mistaken, as every author may be, but no one has discovered Reisman’s errors and written down explanations of them. Along with the writings of his teacher, Ludwig von Mises, Reisman’s Capitalism constitutes some of the best existing economics knowledge.