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.
Jonathan, don't forget that my appeal to "facts" concerning reserve ratios was intended as a response to the claim that under free-market conditions banks would be forced to hold fractional reserves. My point was that, if that is so either (1) there's never been anything even reasonably approximating a free market in banking or (2) there has, but people were systematically fooled into thinking they were holding 100-percent backed "receipts" even though they weren't. Neither proposition is supportable.
As for praxeology, I honestly believe that it, and other "methodologies," while fine as subjects for philosophical discourses concerning what it is that good economists do, are not helpful as self-consciously applied formulas for actually doing economics. I never thought about praxeology when I wrote TFB, or anything since. I thought about making sensible arguemnst supported by available evidence. What's more, I am absolutely convinced that if I had tried to be self-consciously "praxeological" in doing my work, I'd have felt so cramped that I wouldn't have been able to finish. (Or worse, I would have written some empirics free stuff like... well, never mind the examples.) Hard-core praxeologists, who insist on doing nothing but, are a dime a dozen; they include persons whose contributions to economic knowledge consist of emphatic blog posts, but nothing else.
DD5,
Since this thread has been hijacked anyway, I'd like to ask about some point you raised.
You write "Not facts but historical facts. They are relevant to our understanding of history, i.e., economic history. Never to economic theory itself." I have two quibles with that.
1. I think historical facts are useful as counterexamples. If a praxeological train of thought leads one to conclude that, say, birds fly north for the winter, and we see that they fly south, it shows us we goofed somewhere.
The stagflation of the Nixon years has been used as a counterexample to aspects of Keynesian thought. [As an aside, amazing what a mess one person can make].
2. Reading Human Action, I see it is full of historical statements. Rothbard made a list somewhere. One of them is the assumption that some people at times prefer unpaid vacations to working. How can one know that if not from historical fact?
My humble blog
It's easy to refute an argument if you first misrepresent it. William Keizer
"...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 do think it inappropriate,Jakub, for the following reason: people get interest on bank demand liabilities only for as long as they do not exercise the demand option. So If I make a deposit for a week, and then write a check for the amount, I get a week's worth of interest--nothing more (assuming I even get that much--in fact, banks refer to average balances over a period, but let's leave such details aside for the sake of argument.). If I leave the money for a day, at best I earn a day's interest. Whatever the case, I can only keep earning interest until I demand the money back, or spend it (which amounts to the same thing once the check or note clears). So I never get to demand my money and get paid interest on it. I merely get to earn interest while holding to hold a claim including the right to demand my money. The deposit is no different in this respect than any callable loan.
As for runs: of course no-one is happy when they get the bad throw of the dice on a risky asset! I never suggested otherwise--or that customers whose banks fail would merely shrug! But those panics leading to the fed's establishment were not normal consequences of FRB. They had their roots in very serious government restrictions, including restrictions on branch banking and banknote issuance. I've written about this, as have many others. Indeed, central bankers claim that the panic could only be avoided by having a central bank, ignoring these legal restrictions. But that's no reason to join them in their demostrably false claims. (Canada, by the way, lacked the legal restrictions in question, and had no crises.) On all this, see my Cato J. paper, "Legal Restrictions, Financial Weakening, and the Lender of Last Resort," or my SSRN'Cato Working paper, "Has the fed Been a Failure?" I also talk about those crises in Theory of Free Banking.
The thing is, I cannot repeat all the stuff I've written elsewhere again and again for blogs: its essential that persons inclined to take the 100-percent position go out and read ther stuff that's available rather than ask us poor defenders of FRB to compose little versions for each new discussion that comes up! Let's take advantage of those sunk costs everyone!
Selgin: [...]Instead, the same tired old criticisms just get repeated again and again: [...] a "deposit" can only mean a bailment; [...]
[...]Instead, the same tired old criticisms just get repeated again and again: [...] a "deposit" can only mean a bailment; [...]
So you're defining "deposit" differently than the 100-percenters, which was my point in the other other free banking thread. Each camp is right about why their own position is right but is wrong about why the other camp's position is wrong. You guys aren't arguing using the same definitions, which leads you to calling your opponents cult members and Walter Block making fun of you at Mises Circles. How about you guys agree on definitions and then duke it out?
To paraphrase Marc Faber: We're all doomed, but that doesn't mean that we can't make money in the process. Rabbi Lapin: "Let's make bricks!" Stephan Kinsella: "Say you and I both want to make a German chocolate cake."
For the record, DD5 doesn't understand my argument in "Praxeology and Understanding." Careful readers will see that I assign an important role to historical facts in developing all but a very limited "core" of economic theory. I also think this view consistent with Mises' stand--read his Theory and History for more. The "Praxeology" DD5 seems to believe in is a version that would make most useful economics impossible: you can only spin out so much about reality without ever leaving your armchair or otherwise consulting history. You certainly cannot say much of any value about the likelihood of 100-percent reserve banking in a free-market environment!
"So you're defining "deposit" differently than the 100-percenters." Actually Daniel I'm giving the term the meaning it has taken on in the context of banking since the earliest days of FR banking in England. On this see my SSRN working paper, "Those Dishonest Goldsmiths" and sources cited therein. Also, in case he's not among them, see H.D. Macleod's Theory and History of Banking which goes into the very issue in painstaking detail.
Selgin: "So you're defining "deposit" differently than the 100-percenters." Actually Daniel I'm giving the term the meaning it has taken on in the context of banking since the earliest days of FR banking in England. On this see my SSRN working paper, "Those Dishonest Goldsmiths" and sources cited therein. Also, in case he's not among them, see H.D. Macleod's Theory and History of Banking which goes into the very issue in painstaking detail.
I'm not saying that your definition is wrong, instead, I'm saying that is different than the 100-percenter's definition, which makes the debate between you guys futile. After all, the debate isn't about who's got the correct definiton.
Brilliant Daniel. You've basically eliminated the entire argument between free bankers and rothbardians by pointing out it is an issue of definition, that until resolved, can never conclude the discussion.
It is truly amazing how petty some Austrians scholars (on all sides) are at the highest levels. Thank god for us private sector Austrians, who are much more reasonable, and far too productive to waste such time arguing when definitions don't match. ;)
Is it an issue of definition? I don't think it is. These are the arguments, as far as I know (correct me if I missed one):
The differences that I've read are not in the 'definition', rather in the realm of the subject of stability (where, more often than not, I have just seen full-reservist not really understand the argument they're trying to tackle [the opponent's argument, that is] — this doesn't mean that fractional reservists are correct, btw) and ethics (which I personally think is absurd, but you have to give it credence since there are so many who think it's a valid case against fractional reserve banking).
Since we've already derailed the thread in one direction, there's no harm in me introducing another tangent. I've recently been thinking about entrepreneurship. There's not much to talk about, but I've actually started thinking about entrepreneurship as an alternative to the road (the academic one) I've chosen to take so far (with not much success). I just need to start thinking of ideas that I can actually put into motion.
I don't think the different definitions make the debate "futile": the real debate is about whether or not it is legally legitimate and economically desirable for banks to lend sums handed over to them by customers in exchange for contractsd offering so-called "demand deposits." There are ways to settle this, that aren't merely semantics. The trouble is that the 100-percenters think that by insisting on what the term bank "deposit" ought to mean (but in fact hasn't ever actually meant), they also succeed in making a substantial argument on the real matter at hand.
Leland Yeager recently wrote a very good article concerning, not the futility of the debate, but that of the mode of argument just referred to. It is called "Bank Reserves: A Dispute over Words and Classifications."
I don't think the different definitions make the debate "futile": the real debate is about whether or not it is legally legitimate and economically desirable for banks to lend sums handed over to them by customers in exchange for contractsd offering so-called "demand deposits." There are ways to settle this, that aren't merely semantics. The trouble is that the 100-percenters think that by insisting on what the term bank "deposit" ought to mean (but in fact hasn't ever actually meant), they also succeed in making a substantial argument on the real matter at hand. Leland Yeager recently wrote a very good article concerning, not the futility of the debate, but that of the mode of argument just referred to. It is called "Bank Reserves: A Dispute over Words and Classifications."
Who at the Mises Institute do you "disagree" the most in general with? Is the Mises Institute a "cult" because of the FRB issue or are their other issues (price formation, capital theory, gov't intervention e.g) that you disagree on them with and they "fail" to engage you in/don't do "real economics"? I ask you this because it seems from the get go that your opinion of the Institute/some of the "Mises/Rothbard" scholars is overwhelmingly negative, and I wonder if it is solely because of the FRB issue or other reasons.
I apologize if I have mischaracterized you above.
DD5: 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.
This is the type of crap that’s becoming increasingly prominent here on the forums, and it’s why posting here simply isn’t worth it. People take things out of context, attack straw-men, and simply engage in dishonest argumentation.
Professor Selgin never made the argument that FRB is “good” because it existed since at least the 17th century. He claimed that a very specific argument, namely that “FRB always requires explicit privilaige from the state,” and “would surely fade once such priviliages are removed,” is bunk. It is not supported by the evidence.
As far as I’m aware, the freer the monetary system, the lower the reserve ratio’s, and 100 RR’s have only existed in religious theocracies which forcefully banned fractional reserves (which is exactly what Rothbard called for).
"If we wish to preserve a free society, it is essential that we recognize that the desirability of a particular object is not sufficient justification for the use of coercion."
BlackNumero,
See Selgin's comment here.
Selgin: The trouble is that the 100-percenters think that by insisting on what the term bank "deposit" ought to mean (but in fact hasn't ever actually meant), they also succeed in making a substantial argument on the real matter at hand.
Which is what I said. The 100-percenters are using a different definition for "deposit" than you are, thus, they are straw-manning you.
I don't think the different definitions make the debate "futile":
What's the point of debating about movies when one person has defined movies as movies and the other person has defined movies as books?
the real debate is about whether or not it is legally legitimate and economically desirable for banks to lend sums handed over to them by customers in exchange for contractsd offering so-called "demand deposits."
Which is what I was implying when I said that the debate was not about the definition of deposits.
I think the debate between the fractional-reservers and the 100-percenters hasn't gotten anywhere besides name calling and mocking because a definition of deposits has not been agreed to.
I'll read it.