George, since you started posting here, you have kinda won me over, but it certainly wasn’t due to your bedside manner. 
I think the problem with the deposit/IOU stuff comes from loose language. A depositor is not making a loan. There is no IOU when you make a deposit at any other institution, state or private. A deposit receives a receipt. A receipt is not an IOU.
A deposit contract that describes a loan is a loan contract.
lol, did I just read a drunken “deconversion manifesto” rant from George Selgin?
No argument or evidence? Since this is coming from a praxelogist, apparently since you’ve written a paper on it back in your grad years, people I guess should trust your authority on this one.
I don’t know about your grad school years, but praxeology is not to be found in your most popular publications.
My emphasis.
What evidence? You make observations, you make your own interpretations, and you declare for all that there is evidence. This is what I’m talking about. No praxeology. No logical deductive arguments. No nothing.. except empirical observations, which you are apparently free to interpret in anyway that suits you.
These nerdy libertarian fights sure do get fiesty.
Dr Selgin, interesting as the free banking debate is, I wanted to ask you another question. What is your view on Austrian price theory in the tradition of (predominantly) Bohm Bawerk, Mises, Wicksteed and Rothbard? It seems to me one of the most compelling but also possibly neglected research areas in the Austrian tradition, at least since the publication of MES.
On the other hand I know Hayek was an enthusiast of Indifference curves, and even said in an interview he gave at UCLA that it was he that got Hicks to look at Pareto and Edgeworth, helping make this approach to price theory mainstream.
This isn’t proof. This isn’t proof according to any standard of whatever scientific theory of knowledge you wish to adhere to. Certainly not praxeology, nor the scientific method assuming that was made to be relevant just for the sake of argument.
This, this, this! This is the point I made on that other thread on free banking.
I think you’re going off-track here since the OP was about the institutions and their scholars, not the followers/students of those institutions. Although, some time ago there was battling going on this forum between Giles Stratton (a Hayekian) and some defenders of the LvMI. I found it hilarious that Giles used Dan D’Amico as example of the fine products of GMU. Of course, I had to point out to him that D’Amico got his bachelors under Walter Block.
An undergraduate education in economics hardly compares to graduate school.
to DD5: Professor Selgin has written a book offering proof to his claims. No one is keeping you from reading it.
WIlliam,
+1
‘Now, no one can accuse me of being a GMU crony: so if I say that, whatever the faults of that bunch, notwithstanding some relatively low key, residual Lavoie worshipping, the program has no defining dogmas. You can CRITICIZE Hayek at GMU and still keep your union card. You criticize Mises (or Rothbard) at an MI forum and you are likely to find yourself at the bottom of a pile up. Do I blame this on Lew Rockwell? Not in the least: so far as I’m aware, it isn’t MI policy. Instead, it is part of the personally cult that Murray unwittingly brought to Austrian economics. I ought to know, because I once belonged to it.’
I wish to understand the points you are making. Are you mad that you cannot criticize Mises and Rothbard at an institution dedicated to spreading the philosophies and theories of Mises and Rothbard? It would seem like you want to step on toes and make people happy that you are stepping on them. However, what has shown you that civil discussion is a faux pas at the Mises Institute? Are you disgruntled that people are impassioned? Would you like them to be less sure of themselves when you confront them with discourse? You seem to be saying that MI is wrong for not doubting itself. Should MI doubt because you say it should? What exactly are you trying to achieve?
You can criticize Hayek at GMU, wonderful. I can criticize Mises’ ethical theory at my school too (and Hayek too for that matter). I don’t walk into an institute dedicated to an individual then call them all theologians for believing in his philosophy, I am not a child…and I too put away childish things.
Besides, various positions of both Mises and Rothbard are criticized quite often here, and often by forum regulars. I don’t know what Selgin is talking about in that regard.
“Without state sponsorship (Fed and FDIC) only morons would agree to “deposit” (a term for the Frankenstein mix between lending and deposit which is FracRB), i.e. expose themselves to a perpetual risk of being trampled over in a bank run (ending up with no chair when the music stops) in return for an interest handout + free transactional services, while the FracR banker takes “risks” with – and earns profits (interest) on – capital he doesn’t own.”
Fractional reserve banking dates at least from the mid-17th century. The FDIC was established in 1934; no other country had government deposit insurance until 1967 (when canada adopted it). The Fed dates from 1914. So countless persons, some of whom I venture to say were as smart or smarter than you, have have done precisely what you claim only morons would do. And why not? The risk of bank failures has actually been very low in most cases–quite low enough to make the interest and services well worth it. You and other 100-percenters argue as if failure were the typical fate of fractional reserve banks. Well, that’s consistent with your general lack of knowledge of the history of banking.
As for the meaning of “deposits” in the banking context, read Yeager’s essay in the recent Review of Austrian Economics to see the pointlessness of this “etymological” reasoning.
The free banking vs. full-reserve banking argument always seems to run all over the place; first it’s about what the contract says, then it’s about what lay people think despite the contract fine print, then it’s about what they “should” think, then it’s about the definition of a deposit, then it’s back to being about the contract. Or first it’s about morals, then it’s about what people would do, then it’s about history, then morals again. The whole thing makes my head spin.
“I wish to understand the points you are making. Are you mad that you cannot criticize Mises and Rothbard at an institution dedicated to spreading the philosophies and theories of Mises and Rothbard? It would seem like you want to step on toes and make people happy that you are stepping on them. However, what has shown you that civil discussion is a faux pas at the Mises Institute? Are you disgruntled that people are impassioned? Would you like them to be less sure of themselves when you confront them with discourse? You seem to be saying that MI is wrong for not doubting itself. Should MI doubt because you say it should? What exactly are you trying to achieve?”
I am not angry at MI, and I never said that they dissallowed criticism of Mises and Rothbard. Obviously I’m posting here so that’s not the case. I said that there is a Rothbard (and Mises) personality cult that is not official MI policy but that affects the reasoning of some of the more prominent MI economists, and that it is standing in the way of sound scholarship and setting a bad example for students. I said this was particularly true w.r.t. MI-outlet writings on monetary economics, and I stand by that. Your own comments about banking are good examples of the sort of thinking that this leads to–thinking utterly un-informed by historical inquiry. That of course wasn’t the case with MR himself. But it sure is wrt many of his devoted followers.
The ultimate cause of the poor scholarship I refer to is insularity. Read HHH and Hulsman and Block and Bagus and Howden: you will see how little they read or refer to that’s not from from each other and other treu believers; you will see that they refer to other stuff only scornfully and in order to attack it. You will see that they hardly ever publish anything except on the MI cite or the QJAE. They have never really rumbled with other economists, and they never learn a damn thing from those of us who enter their own forums to tell them where they are full of baloney. Instead, the same tired old criticisms just get repeated again and again: Scotland didn’t really have free banking; a “deposit” can only mean a bailment; bank’s multiply property titles; no one would voluntarily put money in an uninsured FRB; 100-percent money “certificates” could circulate just as readily as fractionally-backed ones, etc. etc, etc. All crap; all painstakingly refuted, sometimes in several places; all ever recurring. Yecch. It makes me ill to realize how many people are taken in by this amateurish and silly stuff.
DD5, I know how to figure a reserve ratio from a bank’s balance sheet; I know that economic historians place such ratios at about 30% for England’s early goldsmith banks; I know that in Scotland during the FB era gold ratios of less than 2% where common; and I know that ratios seldom exceeded 10% anytime in post-1800 FR banking history unless statutres mandated it, and that this was true despite the lack of insurance or central banks in many instances.
And I can give references for any of this. Now, irefer me to a single prominent post 1800 case of private 100% reserve banking, with transferable deposits or notes.
Theft, coin-clipping, counterfeiters, fraudsters (legitimized by - and in symbiosis - with kings), and brainwashed (and/or) coerced morons have existed way before that and still exist today. What’s your point?
Please answer this simple question: What does a FracRB “leposit” account offer that any combination of lending (investment) and deposit (transactional services) do not? Why would a market agent expose himself to the extra (substantial, fat tail, and ruinous) risk of missing a musical chair (total ruin) when he could enjoy all the benefits of a “leposit” without taking such risk? Assuming he was not a moron, that is.
Selgin,
Not that I am in any postion to organise what I am to propose but any way: I propose that you Selgin formally debate a prominent 100% reserve proponent, for example Hulsmann or Walter Block on the following motion: 100% Reserve Banking would be the prominent form of banking in a market anarchist society.
Note I didn’t just say a free market in money since this could leave open the influence of statist judges in interpretation of common law cases and thereby change banking practices.
The debate could run as follows:
30 mins opening proposition
30 mins opposition
15 minute rebuttal
15 minute rebuttal
20 mins cross examination period (e.g. You question Block directly and he must immediately respond)
20 mins of the same
20 mins Closing statement (no new information to be forwarded)
20 mins closing statement
Timings are approximate.
What do you think?
Such a debate would allow us to hear cogent cases articulately argued by both sides and allow each side to directly engage the other rather than following a dispirate paper trail or finding out what the “dark” side thinks from our own side.
Also what do the community think of such a style of debate and would they wish to hear other topics debated in this manner?
First of all, your assumption that a 100-percent bank can offer the same “transactional services” as a fractional reserve banks is wrong: unlike fractionally backed banknotes, 100-percent backed money certificates cannot circulate freely, because the issuer must be able to collect storage fees from the owners of the money they represent; on this see White’s “Accounting for Fractional-reserve Notes and Deposits”.
Second, because 100-percent banks cannot profit by serving as intermediaries, they have to charge fees for any storage or payment services they offer. So instead of getting a “free” checking account or one that even bears a modest interest return, the depositor (or “receipt” holder has the make a monthly payment to the bank.
As for the “extra, fat tail, ruinous” risk: bull. Banks don’t fail that often (here you repeat central banker propaganda); and the record of banks in relatively unregulated arrangements like those of 19th century Scotland and Canada is very goode indeed. People in those systems couldn’t wait to exchange their clumsy gold coins for fractionally-backed bank notes and deposits, and they weren’t morons: the risk-return trade-off made their choice a no-b rainer. The alternative 100-percenter theory that they were all idiots who didn’t know that their banks weren’t warehousing gold is so incredibly foolish that I blush for the Austrian School whenever I hear it repeated.
And by the way: there was never any law anywhere that ruled-out 100-percent banking as an option, whereas many places had laws stipulating minimum reserve ratios.
OK: this is my last entry on this for this forum. The supply schedule for nonsense arguments for 100-percent banking is horizontal, which means that any refutation provokes another dozen responses, all equally bad.
If the MI or some other group will arrange it, I will happily take on two or three 100-percenters at the same time; or let White and me jointly debate any number of them.
GS