Exclusive Interview
Steve Horwitz on GMU, the Mises Controversy and the Promise of Austrian Economics in the 21st Century
The Daily Bell is pleased to present an exclusive interview with Steve Horwitz.
Introduction: Steven Horwitz is the Charles A. Dana Professor of Economics at St. Lawrence University in Canton, NY. He completed his MA and PhD in economics at George Mason University and received his A.B. in economics and philosophy from The University of Michigan. He is the author of two books, Microfoundations and Macroeconomics: An Austrian Perspective (Routledge, 2000) and Monetary Evolution, Free Banking, and Economic Order (Westview, 1992). Dr. Horwitz has written extensively on Austrian economics, Hayekian political economy, monetary theory and history, and macroeconomics. In addition to several dozen articles in numerous professional journals, he has also done nationally recognized public policy work on the role of the private sector during Hurricane Katrina for the Mercatus Center, where he is an Affiliated Senior Scholar. His current research is on the economics and social theory of the family, and he is currently at work on a book on classical liberalism and the family.
Daily Bell: Give us some background. Where did you grow up and go to school?
Steve Horwitz: I grew up in suburban Detroit, in Oak Park, Michigan. I then went to University of Michigan, Ann Arbor, where I got my Bachelors degree in 1985. That degree was a double major in economics and philosophy. After that I was off to Graduate School at George Mason where I got my PhD. I was there from 1985 to 1989.
Daily Bell: How did you become interested in Austrian economics?
Steve Horwitz: A lot of economists get interested in economics and then they learn about Austrian economics. For me, it was the other way around. I actually was interested in libertarianism before Austrian economics per se and that was in high school. I was working at the local public library and at the time, say 15 or so; I read a lot science fiction and was interested in anybody who had a weird theory of the world. This new book came into the library, that not many libertarians ever mention as one that "converted" them, called "Restoring the American Dream" by a guy named Robert J. Ringer, who was an investment advisor, a libertarian guy.
Ringer's book was a popular brief for libertarianism on the eve of the 1980 election. So I read this book and I was very persuaded by what he had to say. I looked at the books that he said I should read and one of his books that I found in the library was Murray Rothbard's "For a New Liberty." I was also reading Ayn Rand and other Austrian economics books and I kept following it as I went into University and became an economics major.
Daily Bell: Tell us about your book: Microfoundations and Macroeconomics: An Austrian Perspective.
Steve Horwitz: This is hard to summarize in a brief conversation but basically the book looks at the issues that conventional macroeconomists want to look at, inflation, deflation, business cycles and these sorts of things, but from an Austrian perspective and focusing in particular on the way in which inflation, deflation, business cycles ultimately manifest themselves as microeconomic phenomena. That is, the problem with inflation is not just that it changes the price level; rather that it affects every single price in the economy differently. And when inflation does that to prices, the distortive impact it has on those prices upsets markets across the entire economy. So when you have inflation, it's not just that you affect economic aggregates, but that you affect these individual prices.
And from an Austrian perspective, it's those prices that really matter for what entrepreneurs do, for what consumers do, for economic coordination. What I am trying to do is to resuscitate the pre-Keynesian macroeconomic tradition and tie it more tightly to the Austrian understanding of entrepreneurial market processes that has come to be associated with Mises, Hayek and the rest. It's a book on Austrian macroeconomics but one that reminds us that macro matters because it disrupts that micro coordination process.
Daily Bell: What is your specialty as an Austrian economist?
Steve Horwitz: Monetary theory, macro, for sure. Like most Austrians I write the history of economic thought from time to time. I teach and I have written things on comparative economics, political economy, socialism, and capitalism. More recently I have been doing work on the economics of gender and the family and a book project on libertarianism and the family that I am almost done with. I think all those would qualify as specialties. I have written a lot on Hayek as well.
Daily Bell: Are you still comfortable with the name "Austrian?" If not, why not?
Steve Horwitz: Am I still comfortable with the word Austrian? Yes and no. I think that the name still remains useful for conveying a certain set of ideas, ideas that I believe in deeply and passionately.
On the other hand, and I gather this is where this question is coming from, we changed the name of our blog to "Coordination Problem" from "The Austrian Economists." We had a couple of concerns. Austrian economics has become tightly identified with libertarianism and free market politics, especially in the land of the Internet. Many people who call themselves Austrian economists are not even economists; they are people who are interested in Austrian economics, which is great, but they are consumers of it not producers of it.
So part of the name change was to say we understand Austrian economics, but we care about other strands of economics that assist with understanding the world in a productive way. Austrian economics is a body of thought; it's a series of questions; it's a theoretical framework; it's not a set of answers. So what we really wanted to explain is what interests us. How do people coordinate their behavior under uncertainty, under limited rationality, using a marketplace to do that; how do markets facilitate that coordination in ways that government can't? All kinds of questions that deal with coordination, which was at the center of certainly Hayek's work and I think Mises' works as well. We really wanted to change the name of the blog, from what was an answer ("Austrian Economics") to a question ("Coordination Problem").
Daily Bell: Can you characterize the Austrian school at GMU? Would you refer to it as Hayekian?
Steve Horwitz: I think there are a couple of things at GMU that may be confused in the public mind. The George Mason Economics department has at least 30 members. Of those probably 5 or 6, would be comfortable with the label Austrian; the rest of the department would not call themselves Austrian. The George Mason department is not an Austrian department. It's a department where there are a number of Austrians and a place where one can study Austrian economics and get a PhD.
The department as a whole is a wonderful, crazy madhouse, full of eclectic people who generally believe strongly in the market. I love them, but they are not all Austrians. As far as Austrian economics goes, they are interested in Mises and Hayek and Kirzner and just about everybody else.
Daily Bell: What is the difference between Mises and Hayek from an economic/philosophical point of view?
Steve Horwitz: There are certainly differences there and we could write books about it. Certainly Mises was more of a rationalist in ways that Hayek criticized. Mises had the strong belief in a priori economics. I think from a political standpoint, Mises thought there was a smaller role for government than Hayek did. Hayek was more engaged with the mainstream in economics than Mises was but for all those differences, the over all general principles behind their ideas is highly synergistic.
There are numerous debates about who was what and there are people who are skeptical about Hayek because he was not really a libertarian. Hayek gave the state a more significant role and because of that he gets dismissed. I think that is ridiculous.
People who dismiss Hayek because he is not a "radical enough" libertarian are making a foolish mistake. There are a lot of good things in Hayek that help us understand how such a society – a radical libertarian society would work – even if Hayek himself didn't go there. More importantly, there are a large number of economists who are highly influenced by Hayek (like those of us at Coordination Problem) who are also radical libertarians. The division between the radical Misesians and the quasi-statist Hayekians is for the most part a false one. One can be a Hayekian and be radically libertarian, even if Hayek himself didn't take that position. The claim that those who are relatively more interested in Hayek's work are necessarily less radical is simply false.
Daily Bell: Why do you think Austrian economics has not caught on more academically?
Steve Horwitz: It's because we have different views of what constitutes a good argument and good evidence. Those who control the levels of power in the discipline don't think we are completely scientific in many cases. They are better than they were 25 years ago in graduate school, though.
Why hasn't it caught on in the policy world? It's hard to convince people who have power to give it up. Most Austrian economists are libertarians and think that the state should be smaller than it is and it's hard to convince people who depend upon government for their living or their power to say that's no good. As far as the public goes, economics is tough. It's counterintuitive and it's often easier to believe Keynesian type arguments.
Daily Bell: Should central banking under the color of the state be abolished?
Steve Horwitz: This has a nice short answer: Yes, next question.
Daily Bell: Are you in favor of free banking? Is fractional reserve banking a crime? Does fractional reserve banking inevitably lead to a central bank and then a government takeover?
Steve Horwitz: Yes, I am in favor of free banking. I don't think fractional reserve banking is a crime or unethical or fraudulent. I agree with the critics who say that banks' policies need to be sufficiently clear to bank depositors. I think it is clear already that your deposit is a loan to the bank, which in turn loans it out to someone else. The nature of that contract ¬- the loaning process – is that you can call it in anytime and the bank is obligated to give you your currency or whatever it might be when you decide to cash in your demand deposit. (That is why it is called demand deposit.) That is their contractual obligation to you. If they should fail on that obligation because they are not holding enough reserves then they are in breach of contract. That is the crime and they should pay the appropriate legal and economic penalties for that breach.
The crime is not that they are operating on fractional reserves; it's when they don't live up to their obligations. There is just no real world example of where 100% reserve banks were preferred by the public, when they competed on equal/legal landscape with fractional reserve banks. The public understands it; they want it and they benefit from it and the economy benefits from it.
As for whether fractional reserve banking inevitably leads to a central bank and a takeover; well, the problem is that we have never had a system where we have had fractional reserve banking without a lot of other regulations that made fractional reserve banking not work very well. Before we had the Federal Reserve we had fractional reserve banking. We also had all these regulations in place that made the fractional reserve banking system work poorly. In the cases where we had factional reserve banking but no government interference, those systems worked very well. They worked very well for the economy.
Who they didn't work very well for were governments and particularly people in governments who wanted to raise revenue to fight a war or deal with an economic emergency. The reason central banks have emerged is not because fractional reserve banking or free banking failed per se but because politicians saw that by grabbing hold of the banking system through regulation or a central bank, they could manipulate it to raise revenue to fight wars or engage in other activity.
So, the story that says we got central banks because we had fractional reserve banking and it always screws up, just doesn't match the history. The history of central banks arose because of a need for revenue not because of any failure related to fractional reserve banking. The failures of fractional reserve banking systems have always been because they have always had other forms of government interference that made them not work well. When fractional reserve banks were free to operate competitively and freely, they largely worked very well.
Daily Bell: What is your position on the Real Bills doctrine?
Steve Horwitz: It's wrong but it was so influential on the Federal Reserve in the early 1930s. Many argue that it is one of the reasons the system screwed up so bad and ended up turning from a recession into the Great Depression. It is ultimately pro-cyclical, in that it will make inflations worse and deflations worse. It always surprises me when people who are concerned about inflation seem to believe in the Real Bills Doctrine. If you believe in this you will end up with much more inflation than you would otherwise get.
Daily Bell: When students are coming into school, what are they thinking about when they take economics courses? Do they have Austrian backgrounds or are they straight Keynesians in their thinking and you try to convert them?
Steve Horwitz: I think they are somewhere in between. Most come into an introductory economics class with no real preconceptions other than what they have picked up in the media. For example, they all think that consumer spending creates economic growth. That's a Keynesian idea but it's not because they got it from Keynes; it's because it's out there, in the media, CNN and every other place. Occasionally I have someone who has read a few different books, but the majority of them have no systematic views and have just drunk the water around them. So they are full of the usual populist fallacies. It does seem though, in the last few years, that there is a little bit more skepticism about what government can do in light of the crisis. Even that is a mixed bag.
Daily Bell: Is Keynesianism dead?
Steve Horwitz: I thought Keynesianism was dead but along came this big recession and it rose from the dead and is back. Some version of it is still alive and well.
Daily Bell: What is the predominant economic discipline today? Econometrics?
Steve Horwitz: I think today there is no dominant school of thought. Econometrics is not a discipline or a school of thought; it is a set of tools that economists use to look at the economy. It's true that much of the work in economics, the applied work, uses econometrics and other statistical techniques to understand various phenomena, but that is a technique. You can be a Keynesian and use econometrics, you could be an Austrian and use econometrics.
Daily Bell: How can economists justify their craft if they are not Austrian? So long as the price of money is fixed, nothing else works – theoretically or practically.
Steve Horwitz: They will say, look this is how science gets done. We go out and collect data and we test it and we look for a relationship in the data and we try to explain those relationships using economic theory. This is the way science proceeds. What they think they are doing is contributing to knowledge. I think that is not the only way you contribute to knowledge and that it is important to understand that there are very good economists out there who do very good work – economists who are free market libertarians and who are not Austrians. They use other techniques and other approaches to explain how markets work and why government fails.
Daily Bell: How did you meet Professor Boettke?
Steve Horwitz: We met at graduate school. He was about a year ahead of me at George Mason and so when I got there in 1985 he was already there. There was a group of us at the time who were just very passionate about Austrian economics, about libertarianism, and very motivated to try to take over the world and the world of economics. We have had a common vision for the last 25 years and we have been trying to bring that vision to reality in our different spheres and in our different ways.
Daily Bell: Were you surprised by the furor caused by the Wall Street Journal article on Professor Boettke? Was the young woman who wrote it surprised?
Steve Horwitz: You know there is a premise in this question that I think is very funny. The only furor was on like six libertarian blogs. There was no furor outside of that. There certainly was no furor on the side of Pete Boettke and the George Mason group. I spoke to the woman on the phone for an hour and originally it was going to be an article on the resurgence of Austrian economics within the economics profession. It was not going to be focused on Pete. And I think as she talked to more and more people, what she was hearing was that the center of gravity of what was happening was at George Mason and Pete was the person who was driving it. And I think the more she heard that, the more it seemed to be a good piece of journalistic narrative to make the story about him.
Was I surprised that, say, the Mises Institute and others were upset that he was portrayed as the leading Austrian economist ... no. But she was looking to explain what was happening in academia. When this was all going on, I said that one of the differences is that the folks at GMU focus 90% of the time on training economists to work in academia and they believe that academia is the place where they fundamentally have to change the world first to have all the other changes we might like to see happen.
The Mises Institute has a much broader mandate. They do some things in academia but they also have public outreach, publish online, provide resources on their website and are involved in broader libertarian politics. The folks at the Mises Institute are more skeptical about academia; they tend not to believe that that's where the fight is. They don't try to engage the mainstream in economics. They are in their own world with respect to academic economics. It did surprise me somewhat that they were upset given that they haven't made academics their primary focus and GMU has. But, hey, who's leading the charge in academia; it's these guys over here. As for the young woman, I don't think she knows there was a furor. She has no clue about divisions within Austrian economics. She got the story that would sell the most newspapers. And ultimately that's what the Wall Street Journal cares about. They couldn't care less about libertarian infighting; they're not trying to consciously dismiss the Mises Institute. They just want a good story that sells papers.
Daily Bell: What do you think is going on the world today? Is fiat money dying?
Steve Horwitz: That's a really interesting question ... if you want to go by the price of gold cracking $1,300 it sure seems like it! I don't think I want to say fiat money is dying but I have been a critic of central banking for 25 years, and I have never seen a time when more people are taking the idea that we don't need a central bank more seriously. Criticism of the Fed and auditing the Fed is out there in a way it never was before. I think that is a good sign. It does not suggest that our money is dying but people are beginning to ask some important questions.
Daily Bell: In your opinion what is the biggest economic issue today?
Steve Horwitz: I think it is the growth in government we have seen in the United States in the last few years and particularly the growth in debt and the potential inflationary consequences of that debt and the possibility of a sovereign debt crisis. That whole intersection of debt and devaluation of the dollar is by far the biggest issue today. We have set ourselves on a very dangerous path that I don't see how we are going to get out of in an easy way.
Daily Bell: Where is China headed? We think toward a real estate crash.
Steve Horwitz: I don't have much to say here. I am not an expert on China. China overtaking us I think is unlikely because they have their own problems to deal with.
Daily Bell: Will the EU survive?
Steve Horwitz: Again, I am not an international economics expert and again I am hesitant to say too much of anything. I will say though it is very hard to survive in a system like they have now where all the members have to make one decision about monetary policy but have to make separate decisions about fiscal policy. The Greek crisis is all about these sorts of things. When you decentralize fiscal policy but centralize monetary policy you create tensions there that make it very hard to survive for too long.
Daily Bell: What is the role of government if any?
Steve Horwitz: Well sometimes it depends what day of the week you ask me but certainly I have not ever seen a case for government to do something that is so persuasive that I think it's conclusive. That does not mean that such a case could not be argued, but my working hypothesis is that the role for government should be little to nothing and to the extent that is has a role it should be as decentralized, small and localized as possible. I am a great believer in governance. I'm a great believer in rules. I'm a great believer that groups of people need to organize themselves according to rules, but I am also a great believer that government works best when it's small, decentralized and voluntary.
Daily Bell: Do you believe the current war on terror is justified?
Steve Horwitz: No. We have created this enemy, terrorism, which we will never defeat, because it's not a person or a place, it's an idea. We will always continue to invent new ghosts to scare us. The American people have been so willing to give up so many liberties in the name of this abstract fight against something that in some sense does not even exist as a thing to fight. It is a war that can never be won because the enemy is so amorphous. It stuns me how quickly people have preferred the illusion of security over their own liberties. Throwing ourselves into serfdom over this constructed thing called terrorism is just a mistake.
Daily Bell: What kind of war is justifiable, if any?
Steve Horwitz: Genuinely out of defense. There is never justification for the initiation of coercion, whether it's by states or by individuals.
Daily Bell: Are you a fan of Ron Paul?
Steve Horwitz: My favorite question: Am I a fan of Ron Paul, no. Do I respect Ron Paul, yes. Has Ron Paul been important in getting some very good ideas out there, yes. Has Ron Paul put Austrian economics on the map in some ways, yes he has. But I also don't agree with a number positions that Ron Paul takes on particular issues. Immigration being one of them and free trade being another. I am pro-choice on abortion, so I have issues with him there. I have a good deal of respect for him and I think he has been important but I also have concerns.
Daily Bell: What do you think of the Tea Party?
Steve Horwitz: I could give almost the identical answer. I think there are some good libertarian elements in the tea party. I think to some extent it represents Americans who historically have not been willing to get involved but who are fed up and are saying enough is enough. We're not going to allow Washington to run our lives. I think within the Tea Party there are elements that I find problematic, particularly in the immigration area. I am an open border guy. One way to put it is that the Tea Party is split between the Ron Paul types and the Sarah Palin types and I'm much more sympathic to the Ron Paul types.
Daily Bell: Are you generally hopeful about the direction the West is taking?
Steve Horwitz: I am an incorrigible optimist. We live better than our parents did and our grandparents did. Not as good as we could with all the debt. I think ultimately human ingenuity finds ways of getting around even the worst things that governments do.
Daily Bell: What is the future for Austrian economics?
Steve Horwitz: What a great question! The future is very bright and that is because we now have people with Ph.Ds, who studied at George Mason and studied at other places that are out spreading the ideas and there are people with funds who are supporting those ideas. They are creating the infrastructure that we need to get Austrian economics institutionally established in economics discipline. In the broader public, I think we are seeing more people paying attention to those ideas in ways we have not seen before. So when people like Paul Krugman and Brad DeLong who are major Keynesian leftist economists feel like they have to at least talk about Austrian ideas, that is a important victory.
Daily Bell: What is the future for GMU and its Austrian focus?
Steve Horwitz: Hard to say. I mean, I am not there, but I would think their future looks pretty good too. They continue to get funding, they continue to make hires and they continue to see Austrian ideas as a key part of what they do.
Daily Bell: What do you do next? Where is your career and well-received work headed?
Steve Horwitz: I will continue to write on the crisis because it is so important. We need to make sure there is a narrative established right now that tells the truth about what has happened during the past ten years. Unlike what happened in the Great Depression where we believed a myth for 75 or 80 years and there wasn't a counter narrative from a free market perspective out there. We have the Internet now. We have all these outlets for publication. We can make sure that people understand what really happened and how government caused this crisis and governments made it worse and how the Fed in particular caused it and made it worse.
Daily Bell: Any books or articles you would recommend to our readers?
Steve Horwitz: I suggested a couple earlier. But there is a pamphlet about the crisis which Pete Boettke and I co-authored for the Foundation for Economic Education called The House that Uncle Sam Built. If you Google it and get there, there is a PDF which can be downloaded. It's a great piece to share with friends for a quick view of the recession. My website – http://myslu.stlawu.edu/~shorwitz – has lots of great information. The Mises Institute is a great source for Austrian books and articles as well.
Daily Bell: Thank you for your time and graciousness in conducting this interview with us.
We thought this was a most interesting interview, coming as it did on the heels of a controversy over a Wall Street Journal article that mentioned GMU as a leading proponent of the Austrian school without mentioning the Mises Institute.
We ascribed that reporting to ignorance on the part of the writer, which Dr. Horwitz seems to agree with, though his perspective is that the writer was focused purely on academic achievement. But there can be no doubt that in the larger scheme of things, the Mises Institute does not have proverbial friends in high places, any more than Murray Rothbard did when he was alive.
This is not the first go-round for this sort of controversy. We have mentioned it before, but it is probably worth re-emphasizing that the power of ideas is truly extraordinary. Lew Rockwell's determination to launch the Mises Insitute – according to Rockwell – incited bitter commentary from the billionaire Koch Brothers. Here is how he recalls the scene in a January 1 2009 post:
A little background: when I started the Mises Institute 26 years ago, the head of the Koch family foundation angrily pledged to destroy me if I went ahead. "We have worked too hard to rid Austrian economics of Mises," he said. Hayek, he claimed, was their man, though, of course, he was far better than that, and a good supporter of the Institute. But the real problem turned out to be Murray Rothbard. It was the greatest of the Misesians and the founder of modern libertarianism whom the Koch World Empire longed to smash, and still does. Murray, founder of Cato, was the one man in the ambit to say no when the Kochs decided to jettison Mises for reasons of DC preferment. Otherwise, they felt, it would be harder to curry favor with the Fed and the Republican party. Hayek's views on central banking, gold, conservatism, and competitive currencies are no more DC-friendly than Mises's and Rothbard's, but they are ignored, and just his name invoked.
What is remarkable about this is that Murray Rothbard was no mover and shaker among the power elite of the time and Mises' name could hardly be found in a textbook at this time. Lew Rockwell was not exactly a household name either, and yet the Koch brothers were absolutely passionate about both Rothbard and Mises – in a negative sense.
Now 26-years later, the Misesian "hard" perspective as regards libertarianism has swept America and is in the process of sweeping the world. Ron Paul's Liberty Committee has gained hundreds of thousands of young adherents and Mises great work "Human Action" enjoys a popularity far beyond what it found in his lifetime.
As we can see from the above interview, a Hayekian libertarian perspective has blossomed as well in the fertile soil provided by GMU and by Dr. Horwitz. This is good from our humble point of view as competition between schools of thought will probably spur on proponents on both sides. Both sides have elements that are attractive.
We have always had trouble with the Rothbardian concept that anything less than full reserve banking was something of a criminal activity. Thus some of the free-banking, fractional (private) reserve ideas espoused by GMU camp (and presumably we would place White and Selgin in this ambit) seem a worthwhile intellectual endeavor and provide a cogent argument. On the other hand, the Rothbardian approach to war as "the health of the state," and the emphasis on anarcho-capitalism seem eminently logical as well.
The trouble with a "soft" approach to free-market thinking (from a purely intellectual standpoint) is that there is ultimately no justification for state action. The real problem is that every regulation and every law is a "price fix" resulting in a queue or some other economic distortion. It cannot be otherwise. When you are telling someone what to do, and demanding they do it on penalty of jail, you are "fixing" the market. This is the problem. Where does this activity stop? Where do you draw the line? (Did Hayek ever answer this question?)
From a purely academic point of view, it ought to be the market that determines human activities not government. This has been called anarchy, but of course it is nothing of the sort. Human culture and traditions provide a substitute for law-making and it is one reason why the fewer laws a society has the more formally religious the society is apt to be. When "God is dead," you can likely be sure law-making has killed Him.
So there is much to recommend the Rothbardian/Misesian approach from an intellectual standpoint. It hangs together. That does not mean that one necessarily insists immediately that society be stripped of all rules and regulations. Living life in the real world is different in our view from espousing a belief system. (Often in real life it is best not to be overly-didactic.) But as a belief system – as an elegant and fully realized intellectual structure – anarcho-capitalism holds the promise of releasing the full potential of individuals and parallels Mises' thought in his great book Human Action.
Editor's Note: We received the following letter from Dr. Peter Boettke regarding the GMU program and have posted it within the thread below and also here so that it is immediately available to viewers:
Dear Daily Bell:
I thought Steve Horwitz's interview was quite informative, but I also think you have the wrong impression about several issues. Our Austrian program at GMU (2 course PhD sequence, 1 undergraduate course, weekly PPE seminar, a weekly graduate student workshop, fellowship program, dissertation fellowships, etc.). The faculty involved are Richard Wagner, Lawrence White, Peter Leeson, Chris Coyne, Virgil Storr and myself. Other faculty and scholars associated are Todd Zywicki (GMU School of Law) and Frederic Sautet (entrepreneurial studies) and Dragos Aligica (institutional analysis).
On our faculty, we have some others who are sympathetic (Walter Williams, Russ Roberts, and Don Boudreaux) and we have others who are very knowledgeable but less sympathetic to Austrianism (Tyler Cowen, Alex Tabarrok, Bryan Caplan, and Dan Klein). And of course we have several others who are neither particularly knowledgeable nor sympathetic, but they are respectful.
But the biggest misinformation that you are working under is that we somehow are dismissive of Mises – Mises's works are required reading in multiple classes at GMU and we value Mises's contributions greatly.Pete Leeson and I published a paper in a refereed journal entitled "Was Mises Right?" Our answer, YES. Leeson, Coyne and I as a research team start from Mises's discussion of Ricardo's Law of Association as the basis of our work, and have been explicit in that. Our work on institutional "stickiness" in transition studies is an attempt to draw the generalized implications of MIses's "regression theorem" for money applied to institutions in general.
Our classes teach Mises, our exams question students on their knowledge of Mises, our dissertation students work on topics related to and drawing from Mises.
The second misinformation is that we do a sort of "soft" form of libertarianism. This again is somewhat ironic since our work represents a radical challenge to the state and the status quo in politics, methodology and analytical approach. No place has done more work on anarcho-capitalism than the work that has come from my dissertation students in the past decade " look at the survey article on anarchism in PUBLIC CHOICE written by Ben Powell and Ed Stringham. Or look up any of the work by Ed Stringham. Or look at my essay "Anarchism as a Progressive Research Program in Political Economy."
So the Mises-Hayek-Kirzner branch is neither anti-Misesian nor anti-anarchist. There can be more classical liberal statements of this program --- Kirzner --- and their can be more Hayekian emphasis --- Caldwell --- but what there isn't is a dismissal of Mises or an out of hand rejection of the anarcho-capitalist position.
Even the fractional reserve banking position that is associated with White, is radically anti-state, not a defense of the status quo! It is fractional reserve banking UNDER a free banking regime; not a defense of our current Federal Reserve System and privileged banks with Deposit Insurance.
I would in closing like to point you to the blog posts I have over the years on Rothbard. www.coordinationproblem.org/2010/07/why-graduate-students-not-only-should-but-must-read-rothbards-man-economy-and-state.html
Also, follow the links provided in that post to earlier discussions of mine on Rothbard.
I have also written on the Mises Institute --- austrianeconomists.typepad.com/weblog/2009/04/the-mises-institute-does-amazing-work.html
I will leave it to you to figure out WHY Lew Rockwell, Joe Salerno, and Tom DiLorenzo write what they write. I will just point out to you that when the Mises Institute published Peter Klein's book, they asked me to write a blurb endorsing the book -- which I did. Also, Jesus Huerta de Soto just published his book on socialism, I wrote the preface.
There is a lot of entertainment to be had on the internet by instigating conspiracies and furor when there really is none. As I believe I told you, the WSJ article was about spreading Austrian ideas (captured by the name Hayek in this instance since he was the main historical opponent to Keynes) within the academy. I have chaired 24 dissertations, 21 either have research or faculty positions at universities throughout the US and Europe.
Ask the others if they have PhD students, and if so have they placed them in teaching and research positions promoting Austrian/free market ideas. I am sure there are some and I would be very interested to know the extent of that activity so if you find out please let me know.
But that is what captured her imagination because she was told by the Paul Krugman types of the world that Austrian economics was so discredited that it had no presence in the academia and then she found out that there was a presence at NYU (a top 10 department world wide) and at GMU and that at least in the last decade GMU has been producing students who are now in positions at UVA, Duke, UC Santa Cruz, Penn, and Chicago. Seems weird right? That is why she found the story fascinating --- that is what Steve is talking about how the story evolved the way it did.
It had nothing to do with the Kochs, it had nothing to do with the CIA (by the way I am vocally anti-war), it had nothing to do with trashing Mises (as Kelly Evans in fact reported back to one critic, quoting me, Pete tells all his students to "love Mises to pieces").
Anyway, there is a lot of misinformation, and even in your follow up to the Horwitz interview you perpetuate some of this misinformation. I hope if you interview Larry White you will in fact come closer to an understanding of the truth of the various positions within contemporary Austrian economics.
Peter J. Boettke
BB&T Professor for the Study of Capitalism at the Mercatus Center,
George Mason University
Our response:
Dear Professor Boettke.
We already heard from Professor Horwitz on this issue and posted the following response (see below) within the interview thread itself. However, given your letter on this issue, and your concern, we shall post your letter as well so that there shall be no mistake about your intentions nor the reality of your program.
This is how we responded to Professor Horwitz, and obviously the sentiments apply to the points you make as well. We were quite pleased with the interview and we have also interviewed Dr. Williams and separately Dr. Selgin (who is sympathetic to private fractional reserve banking) in the past and hope to provide more information about your fine program and work in the future.
Response to Dr. Horwitz (who expressed concerns similar to Dr. Boettke's, see thread below):
If we misinterpreted your remarks in any way, we apologize. No offense was intended, nor did we purposefully intend to distort your views or GMU's. Thank you, as well, for providing the link to the syllabi, and also for making the point about Canada, which we have read before and ought to be re-emphasized.
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Posted by Tawny on 10/04/10 11:03 PM
I think there are some things that 'the market' maybe should not decide/define -- because elements within it might (just maybe) try to 'seduce it down the garden path'/influence its behavior " Keynsianism redux " what else is graduate school for, etc. " and because many really do not understand the matter very well and could be manipulated.
Look how successfully the people have been totally confused about money for " well, just about forever " and how the schools are controlled " their curricula and teaching staff are controlled. In fact, we live in a condition of seige, of information lock-down, and of massive, almost open, bordering on flagrant, corruption in the corridors of governmental,banking, and corporate power.
Giving anyone the power to create money out of nothing is tempting ... perhaps most especially to those whom we might discover to be the least worthy of that or any position of public trust " to those who desire 'liquidity,' especially as regards their personal finances, and also enjoy tampering interestingly (for fun and profit) ... and face it, to those who just plain wanna get rich and powerful as cheaply and easily and quickly as possible.
People are gonna be knockin'on those men's doors, those who do the money creating! Yes! People with power and wealth and all sorts of connections. And condos in Sun Valley and Malibu ... pretty daughters and nieces ... and so on.
But our fractional reserve banking/money-creating banker fellers are just gonna do like they always done " namely, use this great power in the interests of humanity ...do what is best for the COUNTRY! Right? ......... I said, Right? ............. You still there?
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Posted by Peter J. Ritter on 10/04/10 11:03 PM
Let the market decide.
A vast majority of people (wrongly) hold the traditional and officially encouraged view that banks make their living by paying low interest for deposits and charging higher interest for loans; and that their deposits are safe with the banks.
The internet has helped to inform some people and wean them off this stupid version. But a large majority is still ignorant about fraudulent banking practices.
Let the market decide would be ok if the people all knew what they are going to get. As long as that is not the case, it's like throwing them all in the ocean to see who can swim and let a good part of them drown.
Banks still enjoy strong (and undeserved) trust ratings by the public. It will not be easy or quick to get most people to see the stark reality. Only when the public is largely informed about current banking practices, and fractional reserve banking is recognized as the fraud it is, and is publicly judged and condemned, will the public be ready for... let the market decide.
In the meantime the public should be protected from fraud... so why not from banking fraud? While it may be extremely libertarian to see who can swim and who not, it's not the way to build a nation.
You know that this Ali Baba gang of thieves is there, and the majority of people don't. Yet you promote letting the people continue to walk into the gang's traps. That appears to be questionable to me.
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Posted by Weeble on 10/04/10 10:25 PM
@ Peter Boettke
Hi Peter. Thanks for speaking here. I am not sure if you read my impressions of you on the original WSJ article "thread," but no matter, I will reiterate and expand on what I said.
Because you teach economics and have a wealth of knowledge, you cannot help but try to remain unbiased, in order to give a "well rounded" education to your students. In fact, if you were to show bias, then you would end up being a Rogue's Scholar.
The problem with not taking a stand on any one discipline is that you cannot hold up the Austrian banner and really mean it. I, for example, could not teach Keynes without comparing his thoughts to Human Action every step of the way, as Keynes was wrong. I don't know how you do it.
Mises and Keynes effectively negate each other. If you were to take that negation, step back and look at it, I think you would find that the entire WSJ article should be negated, as it could not be true that you are an Austrian. Incompatible philosophies cannot cogently exist inside a mind, unless they are partitioned or the mind is confused. And I know you are not confused.
You would better serve your students to remain a teacher, or toss that whole career and become free to speak your mind as an Austrian without having to think about the ramifications of what you say, thereby diluting the message. Mises cannot be diluted.
Oh, and could you apologize to Steve Horwtiz for me for spelling his name wrong, please? I added an extra "o" to his name. Totally unintentional. It meant nothing. Thanks.
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Posted by Tawny on 10/04/10 09:58 PM
'Let the market decide what counterfeiting is...'
Well here's what I think it is. I think that what is traded in the marketplace for goods and services that are necessary/desirable and scarce, must also itself be both scarce and desired. Also, its amount in circulation should not be subject to manipulation by any entity or group.
Counterfeiting then would be introducing/passing into circulation as 'money' by the above definition, something that in fact IS NOT 'money' by the above definition.... something, say, that is really little more than glorified toilet paper... or has even a more ephereral existence... in cyberspace...
And more heinous, of course, would be actually MANDATING BY LAW the use of any such counterfeit 'money.'
Reply from The Daily Bell
"Well here's what I think it is. I think that what is traded in the marketplace for goods and services that are necessary/desirable and scarce, must also itself be both scarce and desired. Also, its amount in circulation should not be subject to manipulation by any entity or group."
OK, good definition. But why not let others have theirs (within market parameters of course)?
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Posted by Mikeikon on 10/04/10 06:53 PM
@Mike
Oh, so THAT's how economics works. Just reduce the population and we'll all be happy and prosperous, huh? I think you slept through econ 101. I hope you were being sarcastic.
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Posted by Clayton on 10/04/10 05:49 PM
Not to annoy, but to make a more complete statement on what I consider a matter of the highest importance:
The functions that Fractional Reserve Banking renders to the economy, namely the provision of credit, can be done through the investment vehicles known as Mutual Funds, Hedge Funds and Private Equity. The financing needs required for the production of goods and their distribution to the market can be done by factors and lines of credit. All of the above can be accomplished by privately owned and at risk institutions, funded by investors knowledgeable in the various lines of business financed and the various fiduciaries undertaking the risk analysis involved in granting credit or underwriting receivables.
It is my opinion that a system of cooperative exchange with true price elasticity, free of the imposition of governmental controls, subject only to specific contracts and involving only the parties to those contracts, could function without leverage (fiduciary media) to provide the necessary liquidity demanded by a highly intensified division of labor. I can see no necessity whatsoever for the current need of what we call banks in fulfilling any of the economic activities referred to above. The bank of today is as atavistic an element in our society as a buggy whip. One has to ask the question as to why such a hold over from the pre-computer and pre-internet era still holds so much power and influence in the affairs of the economy.
The answer is that they are privately owned and profitable entities that facilitate government influence and control over the economy. In exchange for this service, they are permitted to lend money they do not have and in so doing enjoy profit margins not available to those who are not in the business of banking. The State has bestowed on them the privilege of seigniorage. The function of the Central Bank is to prop up and allocate the benefits of this grant from the State. Without this Central Bank's readiness and legal permission to issue endless amounts of fiat money through its bond buying programs, the existence of Fractional Reserve Banking would be in the long run impossible.
The mechanics of the market place warrant my assertion. Issuing far more claims against money than money available to meet those claims is simply not sustainable without inviting the decline in asset prices and widespread bankruptcies. Fractional Reserve Banking creates just that sort of volatility into the economy that is not productive of economic benefit, save for those that get bailed out by the fiat money producing Central Bank, when the business cycle has reached its nadir and destroyed the lives of numerous individuals who are not connected to the State.
This great evil was well known to von Mises and Rothbard, and is central to their cannon on Money, Credit and Banking. Their rejection of Fractional Reserve Banking was unequivocal. Every fractional reserve bank will in time make just those mistakes in the market place that every entrepreneur eventually makes. The problem is that their mistakes are highly leveraged and likely to lead to a run on their deposits, a cashing out. As bankruptcy looms, the bank turns to the State. And if no State exists, will then do whatever it can to create one. Thus, the fruits of Fractional Reserve Banking are waste, oppression and the legitimizing of fraud. In addition, the corruption and debasement of the existing money is certain to follow.
The history of this subject is clear. We move from real money, regarded so by the spontaneous express of the market place, Gold and Silver, to paper money supposedly backed by real money, to paper money backed by government fiat. So how does the State use government fiat to guarantee the value of its unbacked paper? Taxes and legal tender laws. The higher the tax rate, the higher the demand for government backed paper money. Standing behind the US Dollar is the IRS. Standing behind the IRS is the tax collector, the policeman, the jailor, and the executioner (Mises).
As for those who are arguing for the return to the use of Real Bills of Exchange, it is essential to recognize that they are money substitutes and not real money itself. They are in fact speculative claims, little different than fiat money. In the pre-computer, pre-internet age they may have served some purpose, but their obsolescence should be very apparent. They are only as valuable as the fiduciary that underwrites them, unless that fiduciary can in likewise fashion seek State assistance in backing up its uncollectible claims. Given the inevitability of such events, it gives further impetus to governmental interference in the economy.
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Posted by Joe Blowe on 10/04/10 04:33 PM
When one looks at the Click to view link one sees the debt at 13.2 Trillion $'s, the debt owed to foreign nations, 4.3 Trillion $'s. The difference, I believe, is the 'printed money', created out of nowhere, payable to no one. It is going to be fun watching how this enormity of cash, which has been dispersed amongst the banks, gets reeled back in.
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Posted by Lila Rajiva on 10/04/10 04:20 PM
@DB
APOLOGIES..
I go back and read that the comments I was debating in that post were comments made by someone associated with the Bell, and not by the Bell itself. very sorry ...
we don't need to be convinced you're angelic ... we found a few feathers on our blog ...
Reply from The Daily Bell
Oh, our apologies as well, then. Now that is a first for us - apologizing twice in one thread!
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Posted by Lila Rajiva on 10/04/10 03:31 PM
@Tawny
"I have a forceful way of expressing myself, when in certain moods, and after a morning cup of caffeine"
Lila: LOL..me too.
Tawny:
"t seems to me the only way govt. could possibly be kept honest is to have very small political units, like the Founding Fathers tried to do ' small enough that the people could actively monitor ' and influence ' what they are up to."
Lila:
ABSOLUTELY CORRECT
Private banking is fine.
But fractional banking (sorry Dr. Fekete, DB) = derivatives = negam mortgages = ARMS = leveraged debt = money printing = counterfeiting
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Posted by Lila Rajiva on 10/04/10 03:23 PM
@DB
As I posted earlier, and as Prof Boettke has confirmed by his remarks, I don't think the WSJ piece was about suppressing radical positions versus soft Austrianism.
It was about reviving Mises, without the LRC folks/Click to view link...
I also think the issue is the positioning and framing of the media, not any particular academic's work. No one is arguing that the CIA is dictating lectures to GMU profs.
QUOTE:
"Many journalists apparently think they're fighting the good fight against racism or sexism or anti-Semitism by attacking the Mises folks....as they also did with Rothbard. And as they believed they were doing when they revived various innuendos about Ron Paul .
The day the WSJ publishes an article accurately citing the Mises folks by name for their contributions (love 'em or hate 'em), treating their output and accomplishments fairly and even-handedly, is the day propaganda in the US will give way to journalism.
Do I think Mises is being revived? Actually, yes. But I think the revival is being positioned so as to cut the Mises Institute and Click to view link out of it, along with all the other positions/people believed to be associated with them...
That is, Mises will be repositioned in a way more acceptable to academia. I have no quarrel with that, since that is partly my interest....
My issue " contra The Bell " is not with Boettke or Kelly Evans " but with the WSJ's intellectual honesty about Austrian economics."
Reply from The Daily Bell
What?
"My issue " contra The Bell " is not with Boettke or Kelly Evans " but with the WSJ's intellectual honesty about Austrian economics."
What?
Where did we write we had an issue with Professor Boettke or Kelly Evans?
Emphatically we do not.
We have said quite simply and forcefully:
1. That the WSJ article was written out of ignorance.
2. That the CIA was not involved.
3. That it was not an overt attack on the Mises Institute.
4. We did imply that the GMU Austrian positioning was "softer" than the Misesian positioning. We have apologized for misrepresenting their position on this issue and had no problem doing so. But in THIS controversy, Lila, we have been on the side of the angels in downplaying any "conspiracy. If we have written something other than this, please let us know.
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Posted by Mike on 10/04/10 03:17 PM
Horwitz lost all credibility when he said he was for open borders. We have 60 million unemployed Americans and 30 million illegal aliens, the obvious solution is to get rid of the illegals and give their jobs to Americans. Any one that is for open borders obviously has no understanding of economics!
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Posted by Clayton on 10/04/10 02:28 PM
The credit provision activities that the DB and others attribute to the so-called privately owned Free Bank are currently being handled by what we call Mutual Funds, Hedge Funds and Private Equity. The needs for short term financing of goods in production and distribution are being financed by factors and lines of credit. All these "at risk" activities can be financed by self-insured (not taxpayer guaranteed) institutions. The risk of return to their investors can be completely privatized. Let the chips fall where they may.
However, it is incumbent upon these fiduciaries not to present themselves to the general public as depositories. This is a misrepresentation both in fact and in principle. The existence of the state sanctioning of this behavior is blatantly exposed in the name that was chosen for the institution, which was set up to socialize the losses of these fraudulent institutions, the Federal DEPOSITORY Insurance Corporations. This is not a minor fact. It is an intentional act of deception.
Understanding the implications of this is fundamental to the Austrian Theory of Money and Credit, as pointed out in complete detail by von Mises in his work on the subject. The rejection of the adaptation known as Fractional Reserve Banking is at the center of the Misesian and Rothbardian view of the Nation, the State and the Economy.
Let us remember that 90 day bills or other such fiduciary media are at best money substitutes, not money in and of itself. It is my goal and I think the goal of the other Austrian minded thinkers today, to reconnect people with the knowledge of what money actually is. These arguments around bills of exchange and so-called Free Banking are at a minimum distractions and at worst subversions of that effort.
Reply from The Daily Bell
We are not speaking of the current system and to use the current dishonest system to denigrate a reasonable business practice is not intellectually honest. We speak of the right of institutions to do business as they choose after advertising how they do so. Let the market decide.
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Posted by Tawny on 10/04/10 02:25 PM
I have a forceful way of expressing myself, when in certain moods, and after a morning cup of caffeine, so no disrespect intended here. Good interview and interesting reader comments, some of them very perspicatious.
Re fractional reserve banking. It is basically counterfeiting. Creating money out of nothing is countefeiting and FR banking is creating money out of nothing. So, by long established precedent, banks have been granted (de facto been granted) the special PRIVILEDGE to counterfeit, calling it the cleaned-up and more respectable sounding 'fractional-reserve banking.'(which brings to mind the current word play in euphemistically calling 'quantitative easing' all this Fed/govt. wholesale staggering issuance of fiat currency (also counterfeiting, privilege granted to govt. that the rest of us would land in jail for). All of this re-naming instead of calling it what it is, is clearly DECEPTIVE, and intended to confuse and mislead.
Also I disagree with your guest that the public knew about FR banking and approved. C'mon. The public is kept economically illiterate. They only found out about it, back in the 19th Century, when a bank failed due to pushing the FR banking envelope too far (which of course they WILL do, just as they WILL lean on govt. to allow them all sorts of slack when that happens, which are reasons why there should be NO FR banking) and they lost their deposits.
How would laws against FR creation of electronic or paper 'money'(sic) be enforced? Well gee whiz I would guess the same way other goverment regulations (in the public interest)of business would be enforced (if they were, which to a large extent and increasingly they seem not to be, unless/except against competing power cliques). (Aside: It seems to me that some regulations in the public interest are good things. I still don't quite understand how complete anarchy would/could work " not that anything else has worked, either. Ultimately there needs to be enforcement of standards/agreements against harming others, or it seems, if there is an absence of any enforcing power, we get de facto 'rule' by competing gangs or cliques... which actually, behind the facades, seems to be what we have now. So it is a tough problem. It seems to me the only way govt. could possibly be kept honest is to have very small political units, like the Founding Fathers tried to do " small enough that the people could actively monitor " and influence " what they are up to.
When you say Brownian you are referring to Ellen Brown, the Web of Debt author? There is a review of that posted on Amazon that so deftly exposes its errors and contradictions. But basically " NO ONE " especially neither government nor bankers " should ever ever ever be granted by law the PRIVILEDGE of counterfeiting.
Ellen Brown was married for years to a man who worked for an NGO. NGOs are notorious for being CIA/govt. fronts or 'cut-outs.'
To me it is such a no-brainer that 'yonder nor sorgum stenches' should GOVERNMENT or BANKERS be allowed the special privilege to create money out of nothing. NO ONE could possess that power and not mis-use it. Certainly not the narcissistic/sociapathic types that manage to claw and scheme and schmooze their way to the top of the heap in business and government. C'mon. Get real, guys.
Re Ellen Brown, I suspect she is a dis-info agent of the 'pied piper' type.... posture as a populist while playing a role in a 'divide and conquer the dissident movement' op. The LAST THING the controllers want is honest money! This to them is like garlic, or daylight, is to vampires. Yes they are threatened by the growing awareness that fiat money and central banking are cons, are fraululent schemes, whose purpose is none other than surreptitiously, covertly capturing the wealth of the working masses, while assiduously keeping them ECONOMICALLY ILLITERATE.
Ellen Brown's work will weaken the movement for honest money. I put her in the same class as the guys who made the MONEYMASTERS ZEITGEIST videos. Divide and conquer. Thesis/anti-thesis/synthesis. The same old ops, the same old strategies, employed over and over and over.
Also how naive can one be, not to know that there are CIA/intelligent operatives permanently working on all major news media staffs. Ditto working covertly on all major university campuses/faculties.
These omissions and distortions that appear in major outlets like the NY Times are very rarely 'golly gee whiz' mistakes or there by any innocent or even market-driven reasons. (It took me so long to finally realize that Congress/Senate are not just ignorant, or whatever " they are CONTROLLED. Ditto the MSM.
Reply from The Daily Bell
You have made this point before, and make it forcefully again. But you also write ...
"Basically " NO ONE " especially neither government nor bankers " should ever ever ever be granted by law the PRIVILEGE of counterfeiting."
You are defining what counterfeiting is, Tawny. Why don't you let the market decide.
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Posted by Alexsemen on 10/04/10 02:21 PM
Every one try to let us see who imbecile we are, because we don'nt hear and understand them speaking in their own "tong" academic !!?? language as scholars ET!
As it is to be very clear seen, they try to put the horse( virtual one) before the wagon ( virtual too) premeditating forgeting about the daily life support mechandise and the producers of it.
They built a very Babilonian Ivory Tower they called academic as well they invented a new religion( virtual too) of the ceremonial theory (inflationary one, of course )of disillusional big numbers, where it is stated a infinty of mathematical Bizanthinical hierathic frozen virtuality !
Therefore despite all economical based mantra's , shaman incantations and mathematics of all kind of nummbers speed it up thru stochastic fancy virtual programs computers they follow the shortest way to the absolute black hole and they are not able to produce one Egg !
That's all- no more no less- than almost an uber religion of theoretical description of one Egg , throughout all mathematical models and virtual valse supositions , where the Egg count no more, it disappeard , does'nt matter , replaced by a bunch of nummbers .
All what they are tallking about is a NEW ERA OF ABSOLUTE THEORYIES OF A " THE MOTHER OF ALL " PONZI schems , ACADEMICAL ONE and there are the NEW Economycal Pocker Maddoff Revelaties Preasts and Pops of Economy , but in een absolute Vertigo of infinites of virtualityies, far beyond the Planck Wall of any and all realityes !
Soon we will uitness that the BIG BANG and LIFE it self was a result of the all unfyied economical Ponzi scheme theory with as the second result : the inflationary Universum !
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Posted by Jeannie Queenie on 10/04/10 01:57 PM
@DB-----
Reply from the Daily Bell to Clayton:
See our response to Jeannie Queenie. It is a straw man argument to conflate the fraud of modern, Western economics today with the market-driven free-banking of yesteryear. All it does is confuse the issue. Let the market decide.
@DB....
Excuse me if I got this wrong, but did you or did you not chide/chastise Cathy for pointing out the criminality of today's scene? Nowhere do I see Cathy or myself or Clayton conflating as you say here: "conflate the fraud of modern, Western economics today with the market-driven free-banking of yesteryear."
Where in my feedback did I say I am against market driven free-banking? And yes,of course we're all well aware of DB's stance on said subject, and safe to say Cathy, Clayton and myself are all for free market driven banking. We are against the beaucoup global banking crime sprees.
An easy to understand lesson on fractional reserve banking, is found here...This is a good video to educate your children on how the powers that be/banksters use money to enslave us...
Money As Debt " Fractional Reserve Banking " Cartels Robbing the Public (1/5)
Click to view link
@ DB,
I think we are on the same page, but yesterday you threw me and others off/Clayton, when you chastised Cathy on her use of words denoting criminality transpiring in the here and now, not the past of which you speak...."free market and honest banking".
I only know this, Idealism is prohibited by reality, and what we have now is not realistic nor ideal, but we must deal with it.
Americans will enjoy this funny-as-hell Uncle Sam video on just how goofy the entire US picture is, not just with banking, but our relationship to the rest of the world and how very complex and incredibly dumb it all is..this vid is sure to make you laugh.
Click to view link
Reply from The Daily Bell
What? Let us be clear.
1. Businesses and banks (warehouses) should be allowed to pursue business as they see fit. For the most part, if they are being intentionally deceptive, the market will punish them and they will go out of business. This point extends to fractional reserve PRIVATE banking. Let the market decide.
2. The above point has NOTHING to do with what is going on today - which is COUNTERFEITING under COLOR OF LAW. It is the process of central bank counterfeiting money within a mercantilist ("public service") context that lies at the heart of the ruination and desolation of Western civil society. Today's disasters, and tomorrow's are a function of this repugnant, obscene and deliberately misleading process. Let the market decide.
3. In fact, we would not even have a problem with PRIVATE "central bank" were such a thing possible. It is the conflation of PUBLIC privilege with PRIVATE profit that lies at the heart of today's Money Power problem. Let the market decide.
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Posted by Roberto on 10/04/10 12:47 PM
Somewhere back at the end of 2008 under the din from the screaming coming from the bailercoaster was a tiny blurb in MSM about a small, family run (generational) bank up in New England,Vermont I believe, that was doing just fine.The reporting was actually unwittingly good in that they somewhat naively arrived at what would characterize a free banking model, a la DB, and what worked for this bank in this case.
Due diligence in their processing,high regard for what Adam Smith recognized as their probity and reputation and most amazingly of all a disciplined vigilance to maintain their reserves at that long observed natural run on pattern of around 15 to 20 %.
To Lila. To provide the tools with which one causes the scales to fall from anothers eyes is to expand immortality exponentially.The gentle truth that money, summoned into existence ,cannot be rational, and belief in such confronts morality, is a gift beyond worldly measure.
Somewhere between the disdainful "consumer economists" and "academic economists" are the rarely heard from "true producer economists" who are too busy moving real capital and keeping the looters at bay to write home frequently.I do think Steve is on to something though with his new work on the family and economic/governing systems as I am convinced the ability to perceive the truth starts in the DNA.I know many in my own family are convinced I moved philosophically offshore some time ago and have forsaken the mother tongue and the mysteries of faith of the great white temple down the street from Capitol to take up residence with the island tribes somewhere in the sphere.
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Posted by Mikeikon on 10/04/10 09:56 AM
"In the system you want to allow, ("PRIVATE BANKS ought to be able to provide fractional reserve banking in a COMPETITIVE environment") the same wealth gets syphoned to different places... and the printed coupons have different pictures. But the people's wealth gets syphoned off just the same. So where is the big difference?"
There is no "siphoning off." Everyone benefits from private FRB. Depositors get free banking services, an easier way to pay, and interest on their deposits, and the bank earns money for the services they provide through the interest earned on their loans. The rest of the community is provided with a source of credit.
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Posted by Peter J. Ritter on 10/04/10 08:30 AM
Bell's position on... handful elite families have the right to print money from nothing...to foment war and tear down Western civil society piece by piece until there is nothing left.
What is the big difference between a handful of families doing it thru central banks... and a lot of different families printing their own money? In the former, all the people's wealth gets syphoned to a concentrated place... and all the printed coupons look the same.
In the system you want to allow, ("PRIVATE BANKS ought to be able to provide fractional reserve banking in a COMPETITIVE environment") the same wealth gets syphoned to different places... and the printed coupons have different pictures. But the people's wealth gets syphoned off just the same. So where is the big difference?
Reply from The Daily Bell
In private enterprise, there is no penalty of law, thus no monopoly of force, etc. People can chose to do what they want.
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Posted by Peter Boettke on 10/04/10 05:45 AM
I thought Steve Horwitz's interview was quite informative, but I also think you have the wrong impression about several issues. Our Austrian program at GMU (2 course PhD sequence, 1 undergraduate course, weekly PPE seminar, a weekly graduate student workshop, fellowship program, dissertation fellowships, etc.). The faculty involved are Richard Wagner, Lawrence White, Peter Leeson, Chris Coyne, Virgil Storr and myself. Other faculty and scholars associated are Todd Zywicki (GMU School of Law) and Frederic Sautet (entrepreneurial studies) and Dragos Aligica (institutional analysis).
On our faculty, we have some others who are sympathetic (Walter Williams, Russ Roberts, and Don Boudreaux) and we have others who are very knowledgeable but less sympathetic to Austrianism (Tyler Cowen, Alex Tabarrok, Bryan Caplan, and Dan Klein). And of course we have several others who are neither particularly knowledgeable nor sympathetic, but they are respectful.
But the biggest misinformation that you are working under is that we somehow are dismissive of Mises --- Mises's works are required reading in multiple classes at GMU and we value Mises's contributions greatly. Pete Leeson and I published a paper in a refereed journal entitled "Was Mises Right?" Our answer, YES. Leeson, Coyne and I as a research team start from Mises's discussion of Ricardo's Law of Association as the basis of our work, and have been explicit in that. Our work on institutional "stickiness" in transition studies is an attempt to draw the generalized implications of MIses's "regression theorem" for money applied to institutions in general.
Our classes teach Mises, our exams question students on their knowledge of Mises, our dissertation students work on topics related to and drawing from Mises.
The second misinformation is that we do a sort of "soft" form of libertarianism. This again is somewhat ironic since our work represents a radical challenge to the state and the status quo in politics, methodology and analytical approach. No place has done more work on anarcho-capitalism than the work that has come from my dissertation students in the past decade " look at the survey article on anarchism in PUBLIC CHOICE written by Ben Powell and Ed Stringham. Or look up any of the work by Ed Stringham. Or look at my essay "Anarchism as a Progressive Research Program in Political Economy."
So the Mises-Hayek-Kirzner branch is neither anti-Misesian nor anti-anarchist. There can be more classical liberal statements of this program --- Kirzner --- and their can be more Hayekian emphasis --- Caldwell --- but what there isn't is a dismissal of Mises or an out of hand rejection of the anarcho-capitalist position.
Even the fractional reserve banking position that is associated with White, is radically anti-state, not a defense of the status quo! It is fractional reserve banking UNDER a free banking regime; not a defense of our current Federal Reserve System and privileged banks with Deposit Insurance.
I would in closing like to point you to the blog posts I have over the years on Rothbard.
Click to view link
Also, follow the links provided in that post to earlier discussions of mine on Rothbard.
I have also written on the Mises Institute ---
Click to view link
I will leave it to you to figure out WHY Lew Rockwell, Joe Salerno, and Tom DiLorenzo write what they write. I will just point out to you that when the Mises Institute published Peter Klein's book, they asked me to write a blurb endorsing the book -- which I did. Also, Jesus Huerta de Soto just published his book on socialism, I wrote the preface.
There is a lot of entertainment to be had on the internet by instigating conspiracies and furor when there really is none. As I believe I told you, the WSJ article was about spreading Austrian ideas (captured by the name Hayek in this instance since he was the main historical opponent to Keynes) within the academy. I have chaired 24 dissertations, 21 either have research or faculty positions at universities throughout the US and Europe.
Ask the others if they have PhD students, and if so have they placed them in teaching and research positions promoting Austrian/free market ideas. I am sure there are some and I would be very interested to know the extent of that activity so if you find out please let me know.
But that is what captured her imagination because she was told by the Paul Krugman types of the world that Austrian economics was so discredited that it had no presence in the academia and then she found out that there was a presence at NYU (a top 10 department world wide) and at GMU and that at least in the last decade GMU has been producing students who are now in positions at UVA, Duke, UC Santa Cruz, Penn, and Chicago. Seems weird right? That is why she found the story fascinating --- that is what Steve is talking about how the story evolved the way it did.
It had nothing to do with the Kochs, it had nothing to do with the CIA (by the way I am vocally anti-war), it had nothing to do with trashing Mises (as Kelly Evans in fact reported back to one critic, quoting me, Pete tells all his students to "love Mises to pieces".
Anyway, there is a lot of misinformation, and even in your follow up to the Horwitz interview you perpetuate some of this misinformation. I hope if you interview Larry White you will in fact come closer to an understanding of the truth of the various positions within contemporary Austrian economics.
Pete
Peter J. Boettke
BB&T Professor for the Study of Capitalism at the Mercatus Center, George Mason University
&
University Professor & Professor of Economics
Department of Economics, MSN 3G4
George Mason University
Fairfax, VA 22030
Email: pboettke@Click to view link
Click to view link
Click to view link
Reply from The Daily Bell
Dear Professor Boettke.
We already heard from Professor Horwitz on this issue and posted the following response (see below) within this interview thread. However, given your letter on this issue, and your concern, we shall post your letter as well so that there shall be no mistake about your intentions nor the reality of your program.
This is how we responded to Professor Horwitz, and obviously the sentiments apply to the points you make as well. We were quite pleased with the interview and we have also interviewed Dr. Williams and Dr. Selgin in the past and hope to provide more information about your fine program and work in the future.
Response to Dr. Horwitz:
If we misinterpreted your remarks in any way, we apologize. No offense was intended, nor did we purposefully intend to distort your views or GMU's. Thank you, as well, for providing the link to the syllabi, and also for making the point about Canada, which we have read before and ought to be re-emphasized.
PS: We shall post your feedback within the article presentation itself so that it is immediately available to viewers.
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Posted by Clayton on 10/04/10 04:01 AM
@ Cathy and @ Jeannie Queenie:
Thank you for your clarity on this issue of Fractional Reserve Banking. The great Murray Rothbard and his "shoulders to stand on" Ludwig von Mises would heartily agree. What we have is a form of fraud. However, it requires the complicity of the State to continue, and thus the incestuous relationship between DC and NYC, the Treasury and the Fed. There is nothing complicated about it.
Ask yourself, at what time when you were opening a checking or savings account at an insured depository did the officer of the institution ever discuss the possible future disposition of the funds your had on deposit. For 95% of the individual depositors the point has been muted by the backing of the FDIC. Only the largest and most informed depositors are the least bit interested in such things. These are the folks who have at risk in these fiduciaries amounts above the limits of the taxpayer guarantees.
Cathy, you are so correct and Jeannie I thank you for coming to Cathy's support. Even in libertarian circles, this issue is not seen constructively.
Reply from The Daily Bell
See our response to Jeannie Queenie. It is a straw man argument to conflate the fraud of modern, Western economics today with the market-driven free-banking of yesteryear. All it does is confuse the issue. Let the market decide.
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