The Review of Austrian Economics

, Volume 25, Issue 2, pp 131–148 | Cite as

Mere quibbles: Bagus and Howden’s critique of the theory of free banking

Article

Abstract

Despite its title, Philipp Bagus and David Howden’s critique of The Theory of Free Banking does more than merely “quibble” with that book’s arguments; their criticisms of those arguments are such as to suggest that the very foundation upon which my defense of free banking rests is deeply flawed. Here, I defend my work against Bagus and Howden’s criticisms, by showing that they rest upon careless or disingenuous readings of my arguments and a poor grasp of basic monetary economics.

Keywords

Free banking Fractional reserves Austrian theory of the business cycle 

JEL Classification

E31 E32 E41 E42 G21 

References

  1. Bagus, P., & Howden, D. (2010). Fractional reserve free banking: some quibbles. Quarterly Journal of Austrian Economics, 13(4), 29–55.Google Scholar
  2. 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
  3. Dowd, K. (Ed.). (1992). The experience of free banking. London: Routledge.Google Scholar
  4. Goodhart, C. A. E. (1990). The evolution of central banks. Cambridge: The MIT Press.Google Scholar
  5. Hayek, F. (1935). Prices and production (2nd ed.). London: Routledge.Google Scholar
  6. Hoppe, H.-H. (1994). How is fiat money possible? or, the devolution of money and credit. Review of Austrian Economics, 7(2), 49–74.CrossRefGoogle Scholar
  7. Horsefield, J. K. (1949). The cash ratio of English banks before 1800. Journal of Political Economy, 57(1), 70–74.CrossRefGoogle Scholar
  8. Horwitz, S. (1992). Monetary evolution, free banking, and economic order. Boulder: Westview Press.Google Scholar
  9. Huerta de Soto, J. (2006). Money, bank credit, and economic cycles. Auburn: The Ludwig von Mises Institute.Google Scholar
  10. Lester, B. (2005). A model of interbank settlement. Unpublished working paper. University of PennsylvaniaGoogle Scholar
  11. Lester, B., Millard S., & Willison, M. (2005). Optimal settlement rules for payment systems. Unpublished working paper, Federal Reserve Bank of New YorkGoogle Scholar
  12. Macaulay, T. B. (1855). The history of England from the accession of James the Second (Vol. iv). London: Longman, Brown, Green, and Longmans.Google Scholar
  13. McGee, J. (1958). Predatory pricing: the standard oil (N.J.) case. Journal of Law and Economics, 1(October), 137–169.CrossRefGoogle Scholar
  14. Norman, B., Shaw, R., & Speight, G. (2007). The history of interbank settlement arrangements: exploring central banks’ role in the payment system. Paper presented at the Bank of England’s Past, Present, and Policy conference, “The Evolution of Central Banks: Lessons for the Future,” 23–24 November 2006.Google Scholar
  15. Salerno, J. T. (2010). White contra Mises on fiduciary media. Mises Daily, May 14, http://mises.org/daily/4389. Accessed 1 April 2011.
  16. Santoni, G.J. (1986). The effects of inflation on commercial banks. Federal Reserve Bank of St. Louis Review (March): 15–26.Google Scholar
  17. Schwartz, A. (2008). Banking school, currency school, free banking school. In S. N. Durlauf & L. E. Blume (Eds.), The new Palgrave dictionary of economics (2nd ed.). London: Palgrave Macmillan.Google Scholar
  18. Selgin, G. A. (1988). The theory of free banking: money supply under competitive note issue. Totowa: Rowman & Littlefield.Google Scholar
  19. Selgin, G. A. (1989a). The analytical framework of the real-bills doctrine. Journal of Institutional and Theoretical Economics, 145(3), 489–507.Google Scholar
  20. Selgin, G. A. (1989b). Legal restrictions, financial weakening, and the lender of last resort. Cato Journal, 9(2), 429–459.Google Scholar
  21. Selgin, G. A. (1993). The rationalization of central banks. Critical Review, 7(2–3), 335–354.CrossRefGoogle Scholar
  22. Selgin, G. A. (1994). Are banking crises free-market phenomena? Critical Review, 8(4), 591–608.CrossRefGoogle Scholar
  23. Selgin, G. A. (1997). Less than zero: the case for a falling price level in a growing economy. London: The Institute of Economic Affairs.Google Scholar
  24. Selgin, G. A. (1999). Hayek versus Keynes on how the price level ought to behave. History of Political Economy, 31(4), 699–721.CrossRefGoogle Scholar
  25. Selgin, G. A. (2001). In-concert overexpansion and the precautionary demand for bank reserves. Journal of Money, Credit, and Banking, 33(2), 294–300. May, Part 1.CrossRefGoogle Scholar
  26. Selgin, G. A. (2004). Wholesale payments: questioning the market-failure hypothesis. International Review of Law and Economics, 24(3), 333–350.CrossRefGoogle Scholar
  27. Selgin, G. A. (2011). Those dishonest goldsmiths. Unpublished working paper, University of GeorgiaGoogle Scholar
  28. Selgin, G., & White, L. H. (1996). In defense of fiduciary media—or, we are not devo(lutionists), we are Misesians! Review of Austrian Economics, 9(2), 83–107.CrossRefGoogle Scholar
  29. Selgin, G., & White, L. H. (1999). A fiscal theory of government’s role in money. Economic Inquiry, 37(1), 154–165.CrossRefGoogle Scholar
  30. Smith, V. (1936). The rationale of central banking. London: P.S. King and Son.Google Scholar
  31. White, L. H. (1990). Review of The Evolution of Central Banks, by Charles Goodhart. Economica, 57(1), 135–137.CrossRefGoogle Scholar
  32. White, L. H. (1992). Mises on free banking and fractional reserves. In J. Robbins & M. Spangler (Eds.), A man of principle: essays in honor of Hans Sennholz (pp. 517–533). Grove City: Grove City College Press.Google Scholar
  33. White, L. H. (1995). Free banking in Britain (2nd ed.). London: Institute of Economic Affairs.Google Scholar
  34. White, L. H. (1999). Hayek’s monetary thought: a critical reconstruction. Journal of Money, Credit, and Banking, 31(1), 109–120.CrossRefGoogle Scholar
  35. Yeager, L. B. (2010). Bank reserves: a dispute over words and classification. Review of Austrian Economics, 23(2), 183–191.CrossRefGoogle Scholar

Copyright information

© Springer Science+Business Media, LLC 2011

Authors and Affiliations

  1. 1.Department of Economics, the Terry College of BusinessUniversity of GeorgiaAthensUSA

Personalised recommendations