The Review of Austrian Economics

, Volume 25, Issue 2, pp 149–157 | Cite as

On not doing due diligence: Bagus and Howden on free banking

  • Anthony J. Evans
  • Steven HorwitzEmail author


In their recent article in the Quarterly Journal of Austrian Economics, Bagus and Howden (2010) present “quibbles” with fractional-reserve free banking. Specifically, they raise what they call “unaddressed issues” in this system, with a particular emphasis on Selgin (1988). We deem their arguments to be more substantial than “quibbles” and see them as part of a longstanding debate about fundamental aspects of monetary theory. We respond to their objections and attempt to specify how debate between the two sides might proceed more productively.


Business cycles Central banking Free banking Monetary equilibrium 

JEL classification

B53 E31 E32 E41 E42 E51 G21 


  1. Bagus, P., & Howden, D. (2009). The legitimacy of loan maturity mismatching: a risky, but not fraudulent, undertaking. Journal of Business Ethics, 90(3), 399–406.CrossRefGoogle Scholar
  2. Bagus, P., & Howden, D. (2010). Fractional reserve free banking: some quibbles. Quarterly Journal of Austrian Economics, 13(4), 29–55.Google Scholar
  3. Congdon, T. (2009). Central banking in a free society, Hobart paper 166. London: Institute of Economic Affairs.Google Scholar
  4. Huerta de Soto, J. (2006) Money, bank credit and economic cycles. Melinda A. Stroup (trans.). Auburn, Ala.: Ludwig von Mises Institute.Google Scholar
  5. Dowd, K. (1990). Did central banks evolve naturally? A review essay of Charles Goodhart’s ‘The evolution of central banks’. Scottish Journal of Political Economy, 37(1), 96–104.CrossRefGoogle Scholar
  6. Goodhart, C. (1988). The evolution of central banks. Cambridge, MA: MIT Press.Google Scholar
  7. Hayek, F. A. (2008 [1931]). Prices and production. Auburn, AL: Ludwig von Mises Institute.Google Scholar
  8. Hayek, F. A., & Friedrich, A. (1990). Denationalisation of money—the argument refined, Hobart paper special, no. 70 (3rd ed.). London: Institute of Economic Affairs.Google Scholar
  9. Horwitz, S. (1990). A subjectivist approach to the demand for money. Journal des Economistes et des Etudes Humaines, 1(4), 459–471.Google Scholar
  10. Horwitz, S. (1992). Monetary evolution, free banking, and economic order. Boulder, Colo.: Westview Press.Google Scholar
  11. Horwitz, S. (1994). Complementary non-quantity theory approaches to money: Hilferding’s finance capital and free-banking theory. History of Political Economy, 26(2), 221–238.CrossRefGoogle Scholar
  12. Horwitz, S. (2000). Microfoundations and macroeconomics. New York: Routledge.CrossRefGoogle Scholar
  13. Mises, Ludwig von (1912 [1981]) The theory of money and credit Indianapolis: Liberty FundGoogle Scholar
  14. Selgin, G. (1988). The theory of free banking: money supply under competitive note issue. Totowa, NJ: Rowman and Littlefield.Google Scholar
  15. Selgin, G. (1997). Less than zero, Hobart paper N. 132, London: Institute of Economic Affairs.Google Scholar

Copyright information

© Springer Science+Business Media, LLC 2011

Authors and Affiliations

  1. 1.ESCP EuropeLondonUK
  2. 2.St. Lawrence UniversityCantonUSA

Personalised recommendations