Economics Questions

Re: How can one be a Chicago-school advocate and "anarcho"-Capitalist?

mahall — Wed, 02 Feb 2011 05:04:35 GMT

I would recommend reading "Denationalisation of Money" by F.A Hayek where he writes how a fractional reserve banking system may occur in a free market... Austrian Economics isn't necessarily anti-fractional reserve.

Thank you for the recommendation. I don't think I can dive into that now, I have other ventures I'm currently pursuing.

Mr. Friedman proposes that free market banking is fractional reserve banking in an appeal to history. I see the free market equivalent to the 'services' provided by fractional reserve banking as two fold: lending & borrowing without the contract of cash-on-demand and then full-reserve banks with the contract of cash-on-demand (vaults). Fractional reserve banking is a combination and ultimately is fraud, in that it is a lending/borrowing establishment WITH a contract for cash-on-demand.

Re: How can one be a Chicago-school advocate and "anarcho"-Capitalist?

Isaac "Izzy" Marmolejo — Wed, 02 Feb 2011 04:22:33 GMT

I disagree, that is if I am reading you right. You believe that fractional reserve banking is nonfraudulent? How can a free market bank keep nonfraudulent contracts with all it's depositors that they can have their cash on demand while holding only a fraction of it's reserves? I believe the hypothetical free market would have full reserve banks (vaults) and if you want to earn interest you can deposit into equity.

I would recommend reading "Denationalisation of Money" by F.A Hayek where he writes how a fractional reserve banking system may occur in a free market... Austrian Economics isn't necessarily anti-fractional reserve.

Re: How can one be a Chicago-school advocate and "anarcho"-Capitalist?

mahall — Wed, 02 Feb 2011 01:18:15 GMT

David Friedman or to whom it may concern,

1. As someone already said, the schools of thought are defined, insofar as they can be defined, by methodology. If you define them by conclusions, you might have problems with Mises' support for the draft and state subsidy of opera.

I only started Human Action no more than two weeks ago, heh. I should probably spend more time learning there then here! But, my mind wanders to the computer too often.

Do you reject praxeology and favor induction over deduction? With the methodology of the Chicago School, do you see it capable of verifying cause and effect in an economy?

2. I don't know what you think "monetarism" is. The quantity theory of money and its implications apply to commodity money, fractional reserve money, fiat money, any other monetary system you can think of. As it happens, my father wrote an essay on the optimum quantity of money and I pointed out that the behavior of the quantity which he argued was optimal was what would be produced by a system of competing private issuers.

I am nothing more than an amateur and I appreciate the response. My inclination towards monetarism was, that an economist which held monetarist beliefs had a non-Austrian view of business cycles. By reading your point here it seems to mean that monetarism is a larger umbrella. The monetarist has more than one path to run, you might say.

3. There is no inconsistency between fractional reserve money and anarchy--and the lower the fraction, the closer fractional reserve money comes to fiat money. On the historical evidence, fractional reserve money, not commodity money, is what free market banking produces.

Once again, I'm an amateur, but I'll stick my head out again at the risk of getting chopped off, heh.

I disagree, that is if I am reading you right. You believe that fractional reserve banking is nonfraudulent? How can a free market bank keep nonfraudulent contracts with all it's depositors that they can have their cash on demand while holding only a fraction of it's reserves? I believe the hypothetical free market would have full reserve banks (vaults) and if you want to earn interest you can deposit into equity.

Anyone feel free to critique.

Re: How can one be a Chicago-school advocate and "anarcho"-Capitalist?

scineram — Tue, 01 Feb 2011 15:18:53 GMT

Because Austrianism has no monopoly on craziness.

Re: How can one be a Chicago-school advocate and "anarcho"-Capitalist?

Isaac "Izzy" Marmolejo — Tue, 01 Feb 2011 09:56:44 GMT

lol, a Keynesian anarchist...

Re: How can one be a Chicago-school advocate and "anarcho"-Capitalist?

BramElias — Tue, 01 Feb 2011 09:08:41 GMT

The Chicago School and anarcho-capitalism have nothing to do with each other. But the same goes for

the Austrian School and anarcho-capitalism. One is a ideology, the other is a methodology as others

have pointed out. You could have asked a much more extreme question: How can one be a Keynesian and

an "anarcho"-capitalist? Well, one option would be that he thinks that even though state involvement would

be good for the economy, he is morally objected to it.

Re: How can one be a Chicago-school advocate and "anarcho"-Capitalist?

Michael J Green — Tue, 01 Feb 2011 08:52:11 GMT

Forum user StrangeLoop calls himself a "Coasean anarcho-capitalist," so there's another. I don't see what about the Chicago tradition, taken broadly, rules out anarchism. As someone new to economics, it's understandable that you might think the Chicago school is simply Friedmanite monetarism, but I believe the defining feature of it today is rational expectations.

Frankly, the strongest arguments in favor of anarchism I have yet read come from non-economists (legal and/or political philosophers) and economists using primarily Public Choice and New Institutionalism economics. I don't know if any of these writers (e.g. Anthony de Jasay, John Hasnas, Bruce Benson) are necessarily Austrians (as, say, Block, Salerno, Boettke, White and Selgin are Austrians), though they all use Austrian insights in combination with the insights of Coase, Posner, Demsetz and others. There is more to modern economics than policy recommendations in response to a recession, and the fundamentals of microeconomics are largely agreed-upon and Austrian-friendly. Law and Economics, Public Choice, New Institutionalism, etc., certainly complement Austrian economics, but they're not unique to it (indeed, they were developed mostly by neoclassical economists), and these are ultimately the disciplines that one must use to determine the feasibility of ordered anarchy.

Re: How can one be a Chicago-school advocate and "anarcho"-Capitalist?

Isaac "Izzy" Marmolejo — Tue, 01 Feb 2011 08:43:19 GMT

read his stuff http://www.daviddfriedman.com/Academic/Academic.html ....http://www.daviddfriedman.com/Academic/Law_as_a_private_good/Law_as_a_private_good.html

Re: How can one be a Chicago-school advocate and "anarcho"-Capitalist?

AdrianHealey — Tue, 01 Feb 2011 08:35:40 GMT

Mises his support for state subsidy of opera was a joke, as far as I know. Something like 'well, if they're going to subsidize something, they might as well subsidize the opera!'

His implicit support for the draft is unfortunate, yes.

Re: How can one be a Chicago-school advocate and "anarcho"-Capitalist?

David Friedman — Tue, 01 Feb 2011 08:30:36 GMT

1. As someone already said, the schools of thought are defined, insofar as they can be defined, by methodology. If you define them by conclusions, you might have problems with Mises' support for the draft and state subsidy of opera.

2. I don't know what you think "monetarism" is. The quantity theory of money and its implications apply to commodity money, fractional reserve money, fiat money, any other monetary system you can think of. As it happens, my father wrote an essay on the optimum quantity of money and I pointed out that the behavior of the quantity which he argued was optimal was what would be produced by a system of competing private issuers.

3. There is no inconsistency between fractional reserve money and anarchy--and the lower the fraction, the closer fractional reserve money comes to fiat money. On the historical evidence, fractional reserve money, not commodity money, is what free market banking produces.

Re: How can one be a Chicago-school advocate and "anarcho"-Capitalist?

Michelangelo — Tue, 01 Feb 2011 08:26:32 GMT

I apologize if you are not a troll, however in my defense the phrasing of your initial question seemed to me to be a flamebait for our resident non-Austrians; amongst other things.

If you are interested how D. Friedman applies his teaching as a Chicagoite to the question of whether anarchy is viable or not, I suggest reading the Machinery of Freedom. I find it an accesible book for most layman and recommend it, along with Blocks' In Defense of the Undefendable, as a good first step towards understanding a free market approach to politics.

http://www.voluntaryistpunk.com/ebooks/The_Machinery_of_Freedom_.pdf

Like others have noted, the difference between 'Austrian' and 'Chicagoite' anarchism is largely in which economic school they use to justify their stance. Although I find it note worthy that there seems to be a concentration of natural rights proponents within the Austrian circle. Not that its something inherent. It might be better to say Rothbardians tend to be of the natural rights sort.

Re: How can one be a Chicago-school advocate and "anarcho"-Capitalist?

im_retarded — Tue, 01 Feb 2011 07:55:52 GMT

I'm tempted to consider OP to be a troll...

Wow. Seriously? Did you not see the part where I conceded to not knowing much of the Chicago school?

Also, a big part of the reason I don't understand is because I'm not particularly well-versed in the Chicago school. I only just recently became interested in economics and I've been "reading up" on the Austrian school (yes, I do plan on learning other schools, but I'm trying to take it one step at a time right now).

Anyway...

http://mises.org/Community/forums/t/22350.aspx

...yes, this is the thread where I discovered (for the first time) Chicago-school "anarchism". David Friedman is still the only Chicago-school market anarchist I'm aware of or that I've ever seen, every other "anarcho"-Capitalist I've met is Austrian. I'm pointing this out because I'm interested in the possibility of this and how this works out. While David replied to your thread, he didn't seem to explain how that works out, and no one questioned that. I don't mean to get caught up in the "schools" but as I've already mentioned the ends don't seem to justify the means, where "Chicago" seems to support minimal intervention and thus can't be anarchistic. Since it obviously can somehow, as David is one of the more prominent market anarchists, there is something I'm clearly missing and not understanding. It's like the first two sentences Mahall wrote.

-Hold on, methodologically speaking, since "positivism" is technically the pillar of the Chicago school, (as AdrianHealy has pointed out, it's not strictly positivist) a Chicago school anarcho-Capitalist would just use positivism instead of praxeology? Is that how David differs from us, and how you can be a Chicago-school advocate and anarchist simultaneously? Is that what I'm missing? If that's the case then I understand now and didn't understand previously because I had difficulty seperating the theories from the schools.

Re: How can one be a Chicago-school advocate and "anarcho"-Capitalist?

Michelangelo — Tue, 01 Feb 2011 06:22:47 GMT

I'm tempted to consider OP to be a troll...

Yes we just had a similar topic regarding the Chicagoites and David appeared. While I consider myself an Austrian, I do think he and his father put it best in saying there is in the end fo the day just good and bad economics. As others have noted there is no reason why a Chicagoite cannot be an AnCap. Similarly Austrians are not mutually inclusive with market anarchism, and unless I am incorrect the majority of Austrians are not anarchists at that.

http://mises.org/Community/forums/t/22350.aspx

Re: How can one be a Chicago-school advocate and "anarcho"-Capitalist?

Jameslary — Tue, 01 Feb 2011 06:21:01 GMT

I agree with you that Chicago School needs to rethink about it's decision on monetarism.The monetarist economic policy based on a stable growth of the money supply. It adopted M. Friedman's theory that all economic woes came from irresponsible money printing by governments. By limiting the government to targeting money supply objectives its role would be neutralized.

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Re: How can one be a Chicago-school advocate and "anarcho"-Capitalist?

Libertyandlife — Tue, 01 Feb 2011 05:52:56 GMT

I'm pretty sure that we already had a thread like this one, where David Friedman did respond. Use the search function.

Also, he had mentioned before that he has something like a search engine sending him reminders of when his name shows up. He's like the Batman of scholars!