Um, yes. Just like I pay monthly payments to the 100% reserve parking garage where I store my car, or daily payments to the 100% reserve doggy day-care place where I “store” my dog.
You have no understanding or knowledge of risk. Would you agree to cross a river (in return for a token reward: interest + free transactions at a bank on the other side) along a path which is on average only two feet deep except for some places here and there (only 0.00001% of the path’s length) which are half a mile deep?
As I said, you have no understanding of risk, whatsoever. No worries, though, most people don’t either. That’s why FracRB has been the sweetest gig around for fraudsters and princes alike. 21st century cheerleaders like yourself aren’t helping the situation either.
Almost everything around you is (and has been) 100% reserve. People rarely buy “50% reserve” cars (“We flip a coin on the day of delivery to see if you get a car!”) in return for a 20% discount on the price. Money is property, just like your car.
Hmmm, I guess this is what happens when I don’t check up on my thread for a couple of days lol. Thanks to everyone for responding, the links at the beginning and Selgin’s response at the Mises Institute were all very helpful. I’m not going to comment on the FRB debate, since it seems like alot of people are already firing at Selgin and he isn’t coming back. I had a couple of questions to ask Selgin, mainly about other areas he disagreed with Rothbard on (e.g price theory), but I am more than grateful that he showed up to comment in my thread.
We should put all of the debates in one day. Bank debate first, then the Murphy/Krugman debate haha.
I sincerely hope that anyone who wonders why I complain about the bad influence of the 100-percent reserve types will read your post, which illustrates precisely what I mean: ignorant and rude–a bad combo. I mean, what does the fact that there are no 50% reserve cars have to do with the lack of laws preventing people fron dealing withg 100-percent reserve banks if they wish? Enough: like I said, there’s an infinite supply of nonsense not worth replying to.
Just one last, quick note: I do not want to encourage anyone to abandonthe Mises Institute. What I want is to seegood economics, and good monetary economics especially, drive out bad economics there. The more people who chime in with reasonable and informed arguments, the more this will happen. There is a great Mises-Rothbard legacy to be preserved, and no organization can preserve it better than MI. But that legacy isn’t insular (Mises and Rothbard were both very widely read, and they took sound arguments from wherever they could), and it isn’t “praxeological” of the cartoon-version that eschews any reference to historical facts. It’s a legacy of serious and factually-informed scholarship, aimed at discovering truth, and not at defending dogmas by hook-and-crook.
So come on, serious Austrians: make yourself heard loud and clear; drown out the tedious and goofy Rothbard-impersonator lounge act and put some real economics in its place!
So anyone who is for full-reserve banking has all their money in a fee-based safekeeping service, not a bank? I have my money in a bank, and I’m not worried about bank runs. Am I being needlessly risky?
The argument is being spun out by both sides like it’s obvious, but cursory assessment seems to indicate there is little worry of a bank run if you only have a few grand in the bank. Can someone show me the math that says the risk is not worth it?
Because Selgin sounded a little sore at the beginning, but now he’s sounding more and more reasonable. Especially the final post above.
Well said. This is a blatant logical fallacy. This is the type of “evidence” by the way, that is offered more extensively by Selgin (and White). There really isn’t much more then this.
BTW Z, this is also the type of [fallacious] argument that you have made in the past regarding governments emerging out of free markets.
No one has ever contested the fact that FRB is the dominant sytem of banking over the past few hundred years. There is no disagreeement here.
Why? The historical facts as such are not under dispute. But you can’t logically deduce any cause and effect by referring to such historical records. Call me dogmatic, cultish, or whatever, but I won’t simply do away with logic. Your arguments are well written but they fail the typicall logical examination anytime.
What tedious goofy stuff? You mean like Rothbard’s “Reservations demand” and “exchange demand” for money. Instead, like the real economists, we should write long and inaccurate explanations on how demand for money can somehow be grasped in terms of velocity of circulation after all.
And how 'bout when this gang says things like, “in a free market, bank reserves would be close if not equal to 100% of their liabilities” as if there weren’t OODLES of evidence showing that this just ain’t so?
"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."
Now, 12 hours later, after I supplied the very evidence he seemed to ask for, he writes:
“The historical facts as such are not under dispute.”
and then proceeds to give me a lesson on logic. Well, tell me DD%, how do you “praxeologically” get from the evidence I offered to the 100-percenter claim that there’s an overwhelming tendency for fractional reserves to give way to 100-percent reserves in a free market? Or do you think that facts are entirely irrelevant to economic argumentation? Hell, even in my hard-core praxeology days I never believed anything so absurd.
It’s very good, in my opinion, as are Prof. Salin’s writings taken as a whole. I would be surprised to discover evidence that it has led to any substantial alteration of the views of the authors it criticises. But I recommend it to anyone sitting on the FRB-100% fence.
I take no side in this debate - I’m still interested in hearing the arguments of both. Given your presence in this thread, let me ask you the following question, which I think of as my main worry with fractional-reserve free banking (hereafter FRFB). I would be perfectly happy with your historical argument that what testifies best to the viability and market efficiency of FRFB are the demonstrated preferences of 19th century bank customers who were consciously willing to play the game of having the cake (interest) and eating it at the same time (the IOU on demand). By the way, if you consider this to be an inappropriate metaphor to describe the service in question, please let me know why you think so. I would consider this to be an unambiguously valid argument if, following any given bank run, especially the panic of 1907, the clients of banks were to shrug their shoulders and say: “we knew all along that this could happen, but that’s fine with us - the cost of enduring such events is still smaller than the advantages flowing from the existence of interest-bearing demand deposits”. However, insofar as my historical understanding of this period goes, this is not what in fact happened. On the contrary, these bank runs seem to have given impetus and rhetorical ammunition to the supporters of central banking, who - as we all know - eventually got their way, with at least tacit approval of the masses (were the latter idiots in that or not?). It would appear that such a development of events says something bad either about FRFB or about its clients, but your argument links the supposed efficiency of the former with its positive evaluation by the latter. Please tell me what I’m missing here.
On a different note - I think you would really have to present more evidence for the claim that whoever disagrees with Mises or Rothbard gets ostracized by the MI community. In fact, even mentioning the two gentlemen in the same sentence seems unjustified in this context - after all, Rothbard criticized Mises on many scores, including his monopoly theory, his minarchism and his “Kantian” praxeology. My papers published in the MI outlets are likewise critical of some of the positions taken by these two figures.
Here, for instance - I suggest that the Austrian (Misesian) conception of rationality has a rather hard time accomodating certain extreme cases of apparently “irrational” human behaviour.
Elsewhere - http://libertarianpapers.org/articles/2010/lp-2-16.pdfI criticize Walter Block’s views on abortion and property rights in general, which are themselves heavily influenced by Rothbard’s thinking. Our debate so far, from what I can tell, has been respectful and mutually stimulating. Thus, I think you are misleading others by suggesting that the MI community practices any sort of “personality cult”. And this certainly does not help mutual understanding and cooperation among the Austrians.
Not facts but historical facts. They are relevant to our understanding of history, i.e., economic history. Never to economic theory itself.
This is and was absurd to you. Fine, but then you can never claim to have accepted praxeology, even in your “hard-core praxeolgy days” apparently.
The tool of reasoning for praxeology is logic. There is no such thing as soft-core or hard-core logical decutive reasoning. There is either correct or false logical reasoning. No, I don’t mean to give you a lesson in logic, but it is a logical fallacy to use mere historical observations in deductive reasoning.
So what is the disagreement here exactly over? You think that it’s OK to use empirical observations in logic, or that logical rigor is overrated or cultic?
That’s the thing. I don’t. From the “evidence” you offer, I (or anyone) don’t get “praxeolgocially” anywhere. It is praxeologically dervied theory independent of your historical observations that allows one to critisize your interpretations of the data.
This is precisely the problem here and what I claim is the vast difference between some Austrians and other Austrians, which most people here are unaware off or ready to deny. It’s not about “free banking” vs. 100%, or about monetary equilibrium, or even price theory. The real difference between the two groups is epistemological. One is Misesian, and one is not.
Empirical evidence helps you check your assumptions, critical to sound logic.
This is an interesting (and very Hayekian) comment.
I’m inclined to agree with Dan on this issue, though. If George wants to validate his beliefs through empirical evidence, that’s fine, but Dan is right that it’s not praxelogy, and I think Dan would have a valid reason to be skeptical. On the other hand, your comment is very relevant, because unless the assumptions are logically traced back to the ‘action axiom’, then I don’t think there is plenty of reason to be skeptical of any conclusions derived thereof (the logic may be fine, but the assumptions may be wrong).
Anyways, Selgin’s The Theory of Free Banking is not an exercise in empiricism (he makes a few empirical claims, but never relies on them to validate his theories). I’m surprised Dan made the claim that “all” of George’s work has been suspect (from that angle).
Selgin: