To put it bluntly, what are the major differences between the two and whats the deal between the feuding?
I'll admit, as far as I know I have not read any explicit "Masonomics" books, but my understanding of the difference is that George Mason tends to stress Hayek more along with more "mainstream" (hopefully I'm not angering anyone with that) monetary theories and methdological approaches. They also seem to cite Mises as supporting their views (FRB etc) while downplaying Rothbard. Mises Institute is more Rothbard (who they say is more in tune with Mises) and the "traditional" Austrian approach. Am I missing any other significant distinguishes?
So whats the drama between them all? Judging by various posts on the internet they appear to have different academic ideas and some of their arguments can get a little personal at times.
Finally, what happened to Gene Callahan? I remember reading his book along time ago and loved it, and now I hear he isn't an Austrian anymore (although he frequents over at Coordination Problem and generally bashes Rothbard). Then I read on a post here he got mad over his book deal with the MI, but I don't know if this is trash talking or not.
And for a bonus question, if you had to pick a "side", which do you prefer? Honest.
For me, Mises Institute.
'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.
'Men do not change, they unmask themselves' - Germaine de Stael
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.
Why anarchy fails
"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.
Selgin: Fractional reserve banking dates at least from the mid-17th century.
Fractional reserve banking dates at least from the mid-17th century.
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
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?
The atoms tell the atoms so, for I never was or will but atoms forevermore be.
Yours sincerely,
Physiocrat
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
Selgin: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;
And this is a problem, how?
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.
As for the "extra, fat tail, ruinous" risk: bull. Banks don't fail that often (here you repeat central banker propaganda);
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?
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.
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.
No one said anything about laws preventing anyone from anything. Nice talking to you.
WTG Selgin!
Ambition is a dream with a V8 engine - Elvis Presley