On not doing due diligence: Bagus and Howden on free banking
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- Evans, A.J. & Horwitz, S. Rev Austrian Econ (2012) 25: 149. doi:10.1007/s11138-011-0155-3
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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.