No one should attempt to treat Ayn Rand and Murray N. Rothbard as uncomplicated and rather similar defenders of the free society, although they have more in common than many believe. As just one example, neither was a hawk when it comes to deploying military power abroad. There is evidence, too, that both considered it imprudent for the US government to be entangled in international affairs, such as fighting dictators who were no threat to America. Even their lack of enthusiasm for entering WW II could be seen as quite similar.
And so far as their underlying philosophical positions are concerned, they both can be regarded as Aristotelians. In matters of economics they were unwavering supporters of the fully free-market capitalist system, although while Rand didn't find corporations per se objectionable, arguably Rothbard had some problems with corporate commerce, especially as it manifests itself in the 20th century. One sphere in which they took very different positions, at least at first glance, is whether government is a bona fide feature of a genuinely free country. Rand thought it is; Rothbard thought it isn't. Yet the reason Rothbard opposed government was that it depended on taxation, something Rand also opposed, so even here where the difference between them appears to be quite stark they were closer than one might think.
When intellectuals such as Rand and Rothbard have roughly the same political-economic position, it isn't that surprising that they and their followers would stress the differences between them instead of the similarities. Moreover, in this case both had a similar explosive personality, with powerful likes and dislikes not just in fundamentals but also in what may legitimately be considered incidentals – music, poetry, novels, movies and so forth.
Yet what for Rothbard might be something tangential, even incidental, to his political economic thought, for Rand could be considered more germane since Rand thought of herself – and many think of her – as a philosopher (roughly of the rank of a Herbert Spencer or Auguste Comte). Rothbard wrote little in the sphere of metaphysics and epistemology, although he was well informed in these branches of philosophy, while Rand chimed in quite directly on several philosophical issues, having written what amounts to a rather nuanced long philosophical essay on epistemology and advanced ideas in metaphysics, such as on free will, causality and the nature of universals. Her followers, such as Nathaniel Branden, Leonard Peikoff, Tara Smith, Alan Gotthelf, James Lennox and David Kelley, among others, have all made contributions to serious discussions in various branches of philosophy.
The central dispute, however, between Rothbard and his followers and Rand and hers focuses, as I have already noted, on whether a free country would have a government. The debate is moved forward in the volume edited by Roderick Long and me, Anarchism versus Minarchism; Is Government Part of a Free County (Ashgate, 2006).
Even apart from their disagreement about the justifiability of government in a bona fide free country, there is the difference between them about the subjectivity of (some) values. Rothbard holds, for example, that "'distribution' is simply the result of the free exchange process, and since this process benefits all participants on the market and increases social utility, it follows directly that the 'distributional' results of the free market also increase social utility." The part here that shows the difference between Rothbard and Rand is where Rothbard says that the "free exchange process … benefits all participants on the market." Maybe most of them benefit in such exchanges but some do not. Suppose someone exchanges five ounces of crack cocaine for an ounce of heroin. Arguably, at least as Ayn Rand would very likely maintain, neither of these traders gains a benefit in this exchange, assuming that both commodities being traded are objectively harmful to the traders' health. Both are, then, harmed, objectively speaking, even if they believed they would benefit.
This may be a minor matter but it isn't, not at least if Rothbard's idea is generalized to apply to all market exchanges. True, from a purely economic viewpoint, both parties in free exchanges tend to take it or believe that they are benefited by these. But this belief could well be false.
Now, of course, Rand would agree with Rothbard that just because people engage in trade that's harmful to them, it doesn't follow that anyone, least of all the government, is authorized to ban such trade or otherwise interfere with it. Such matters as what may or may not harm free-market traders from the trades they choose to engage in are supposed to be dealt with in the private sector. Family, friends, doctors, nurses, et al., or other agents devoted to advising people what they should and should not do are the only ones who may launch peaceful educational or advisory measures to remedy the private misjudgments and misconduct of peaceful market participants. Such an approach sees public policies such as the war on drugs as entirely unjustified even if consuming many drugs is objectively damaging to those doing so.
In any case, the Randian view doesn't assume that all free trades benefit those embarking on them. Let me, however, return to the major bone of contention between Murray Rothbard and Ayn Rand, namely, whether government is (or could be) part of a free country. Given that Rothbard believes government cannot exist without deploying the rights-violating policy of taxation, his view is understandable but the underlying assumption that gives rise to it is questionable. Rand did indeed question it in her discussion of funding government in the chapter "Government Financing in a Free society" in The Virtue of Selfishness, at least by implication, when she argued that government can be financed without taxation. If she is correct, then Rothbard or his followers need to mount a different attack on the idea that the free society can have a government. (And some have indeed made this argument, including me in, for example, my "Anarchism and Minarchism, A Rapprochement," Journal des Economists et des Estudes Humaines, Vol. 14, No. 4 [December 2002], 569-588.)
Rand proposed that instead of taxation, which involves the rights-violating policy of confiscation of private property, a government could be funded by way of a contract fee, a lottery, or some other peaceful method. Whether this is so cannot be addressed here but it shows that Rand and Rothbard were not very distant from each other on the issue of the justifiability of government in a free country. Perhaps the term "government" is ill advised when applied to whatever kind of law-enforcement institution would be involved in bona fide free countries. But this is not what's crucial – a rose by any other name is still a rose and a law-enforcement, judicial or defense agency in a free society is what is at issue here, not what term is used to call it. So, again, Rand and Rothbard seem closer than usually believed.
Yet it's not just about taxation for many who follow Rothbard. Most also hold that the idea is mistaken that government – or whatever it is called – needs to serve a society occupying a continuous territory instead of a Swiss cheese-like region. The idea of a disparately located country, without a continuous territory and with the possibility of all parts being accessible by law enforcers without the need of international treaties, makes sense to Rothbardians. Not, however, to Randians, it can be argued – not unless the familiar science fiction transportation option of being "beamed up" from one area to another (so that law enforcement can reach all those within its jurisdiction) is available. Otherwise, enforcement of the law can be easily evaded by criminals.
Again, this isn't the place to resolve the dispute between Rand and her followers and Rothbard and his. This brief discussion should, however, indicate where their differences lie. It doesn't at all explain, however, why the different parties to the debate tend often to be quite acrimonious toward each other. What may explain this, though, is a simple point of psychology. Nearly all champions of a fully free, libertarian society are also avid individualists and often tend to insist on the policy of what might be called: My way or the highway! Even when their differences don't warrant it.