The Panic of 1819: Reactions and Policies

by Murray N. Rothbard

The Panic of 1819 was America's first great economic crisis. And this is Rothbard's masterful account, the first full scholarly book on the topic and still the most definitive. Rothbard tells the story about a disaster that could not be attributed to some specific government blunder or disaster. It seemed to originate from within the economic system itself. Its cause was not obvious to observers at the time. Confronted with something new, the Panic engendered much discussion and debate about possible causes and remedies. As Rothbard observes, the panic provides "an instructive picture of a people coming to grips with the problems of a business depression, problems which, in modified forms, were to plague Americans until the present day." There were many cranky and contradictory remedies proposed, and Rothbard reviews each one. But in the end, there was no widespread confusion on what caused the downturn. Instead, it was widely known that a false prosperity is a very dangerous thing. It always turns to bust.

Genres: Economics, History, Nonfiction, Politics, Philosophy

292 pages, Paperback

First published January 1, 1962

About the author

Murray Newton Rothbard was an influential American historian, natural law theorist and economist of the Austrian School who helped define modern libertarianism. Rothbard took the Austrian School's emphasis on spontaneous order and condemnation of central planning to an individualist anarchist conclusion, which he termed "anarcho-capitalism".

In the 1970s, he assisted Charles Koch and Ed Crane to found the Cato Institute as libertarian think tank.

Reviews

[David Robins · Rating 3 out of 5]

Great coverage of the topic, but not extremely interesting unless you're interested in the minutiae of how particular states and cities reacted to the panic, what legislation they passed and tried to pass, and the factions involved. This is a tale of attempts to inflate the currency, interfere with contracts (via stays, forced appraisals, and allowing banks to suspend redemption in specie), and protectionism. Laissez-faire advocates sometimes triumphed, but frequently the whining of imprudent investors and speculators caused government to violently interfere in the free market. But there was nothing on the scale of the horrific New Deal, and the economy recovered on its own in short order

[Bakunin · Rating 3 out of 5]

Another Rothbard classic.

Rothbard goes through great lengths to explain the economic climate of the states at the time in order to provide a background for the panic. He shows how extensive borrowing before 1819 was and that this was indeed the source of the panic. The 1819 bubble was close in kin to the real estate bubble in the early 90's: speculators saw a great opportunity to buy land as its value had been rising for quite a while. These speculators saw to it to buy as much as they could with money they could borrow. Once the land started declining in value, a panic emerged.
Lenders feared that speculators would be inabile to pay back their extensive loans. This resulted in speculators turning to congress to provide "debt release".

The US government, under the leadership of James Monroe, refused to issue debt release and let the bubble run its course. This, contrary to popular opinion, was a common way for the government to handle economic panics prior to the great depression.

I liked it, although I found that an overview at the start of the book would have helped me understand Rothbards message. The Panic of 1819 is Rothbards first work on economic history and I found that at times the reader would be overwhelmed with information.
I therefore find that the work is better suited for those specially interested in the economic history of the US rather than your average layman.
All in all the work provides a good understanding of one of the first economic crisis in the US.

[Ronnie · Rating 2 out of 5]

I love all of Rothbard's books but this is my least favorite. It doesn't have the typical Rothbard style which has a rash bent towards anarcho capitalism. It does clearly cover the panic of 1819 in great detail getting into the minutiae of how particular states and cities reacted to the panic, what legislation they passed and tried to pass, and the factions involved. The real redeeming aspect of the book for me was to realize that even in 1819 political leaders were attempting to inflate the currency, interfere with contracts (via stays, forced appraisals, and allowing banks to suspend redemption in specie), and tariffs. These movements went so far that the "Friends of Natural Rights" describe the other side of creating a government that owned everything and everyone should be placed under a board of trustees by the way they were using tariffs. They described the government as a board of trustees who run everything and everybody only two years after Karl Marx was born. So the arguments we have today have been in existence since America's founding.

The Friends of natural rights was page 232
In 1821 the citizens of Washington County Indiana denounced the banking system as destructive and a fraudulent monopoly. Page 198

[Susan · Rating 3 out of 5]

Many good ideas are in here, but others, previous to him, made the same arguments. What he brings to the table is best for his ideophiles.

[harcourt · Rating 3 out of 5]

This book builds on a lot of what Rothbard espouses in his Conceived in Liberty volumes, which aren't essential to reading this but definitely helpful. This book is a pretty good mix of ABCT, history of thought, and primary sources. Rothbard is also a good historical narrator. I reccomend reading this if you're interested in American history or economic history.

[Mark Geise · Rating 4 out of 5]

“The Panic of 1819” by Murray Rothbard is an extremely informative book, but was not as interesting as I had hoped. It was certainly interesting, but in a different way than I had expected.

The panic of 1819 resulted in intense economic debate throughout the country, much of which Rothbard paints as expansionists versus hard money advocates. Following the economic collapse after the post-war boom, a large section of the population favored a return to prudence, thrift, and economy rather than legislative interference. There were loud factions calling for an abandonment of specie payments banks, establishment of inconvertible money by the states, and minimum appraisal and stay laws to help debtors. Leading up to the panic, banks had extended too much credit and flooded the market with notes with no specie backing them up. This inevitably increased asset, commodity, and real estate prices, fueling the temporary prosperity. When contraction came as the bank notes depreciated and banks failed, those voices argued for the same inflationary policies that had caused the boom and bust in the first place.

Rothbard describes in detail how each state reacted to the panic and how the general public and influential figures wrote and spoke on these economic issues. He does a fantastic job pulling from the newspapers of the day, quoting editorials from a wide range of writers. It is fascinating how history repeats itself, but the discussions and opinions change. Hard money advocates, while a significant faction back at that time, are now considered part of the lunatic fringe by much of the mainstream. Free banking, 100% reserve banking, and fully redeemable currency are opinions/issues that you will never see in any major newspapers today. However, many extremely respected people held those opinions back then. I truly do not believe that these opinions have lost their validity as potential solutions; the causes and problems surrounding economic booms and busts are still the same at their core. I hope to see these discussions return to the mainstream in the future, but I am not optimistic.

I enjoyed “The Panic of 1819”, but it is not for the general reader. It is jam-packed with information on how each state reacted to the economic downturn, which is likely too repetitive or too detailed for many. I recommend this book to the right audience, but not to everyone.

[Didier "Dirac Ghost" Gaulin · Rating 4 out of 5]

The only book you'll ever need in order to understand the panic of 1819, written by the great Murray N Rothbard, anarcho-capitalist extraordinaire, with great clarity and with an hint of his usual spices. As for the reason for the panic itself? The Hamilton-Henry clay ''American system''? The brewing fusion of commerce and state? The central bank I hear you say? All the answers you need are here and more, and also, for an economico-political canvas in which future panics and depressions can be decoded without the Keynesian framework that is usually tacked on in the analysis of economic downturns.

[Becky · Rating 4 out of 5]

I mostly enjoyed this book. It was definitely not an easy read, and I ended up doing a lot of side research to understand many of the economic stuff. Rothbard did a really solid job bringing up all the facets of the depression, along with the public response around the country. I was very happy to read the Conclusion and Remedies Proposed chapters, as they clarified the whole book for me.

[Beth Haynes · Rating 3 out of 5]

On hold for the summer

[George · Rating 5 out of 5]

great esoteric read for anyone interested in early 19th century american history, or the beginnings of the american business cycle.

As Rothbard lays out in the beginning, the Crisis of 1819 was the first major bust in the U.S. business cycle and for that reason should be of interest to economists today. As the title suggests, Rothbard's dissertation is an extremely detailed and extremely value free review of not so much the causes and time leading up to, but the general reactions of the people, state government and federal government in the aftermath of the recession.

As most readers will find this slow going, I suggest first skimming the 15 or so page conclusion and then determine if a full read is worth your time.