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Source link: http://archive.mises.org/3091/randians-go-from-mises-to-supply-side-economics/

Randians go from Mises to supply-side economics

February 3, 2005 by

As was noted by Roderick Long, Ayn Rand used to hold Mises to be the best economist and promote his work , as was reflected in her ideal curriculum of “Aristotle in philosophy, von Mises in economics, Montessori in education, Hugo in literature”.

Today though, the orthodox randian movement represented by ARI has abandoned Mises, even though they otherwise hold every word of Rand to be the final truth. Rather typical that they would choose to deviate in one area where Rand was right.Just look at the ARI-affiliated web magazine Capitalism magazine.

It is true that they do actually have a link to a self-made web site called ludwigvonmises.com which presumably will advocate Mises’s views on economics (They apparently do not want to link people to this web site)-although there is as of yet almost no information on the site.

But if you look at their articles on economics (See also their other sub-categories under “Markets”)you will not find any particularly Misesian articles. Apart from a few essays by Mises, you will find at best some broadly pro-free market articles by for example Walter Williams consistent with Mises’ teachings. But often you find the pro-inflationist supply-side economics advocated there. For example. This is particularly true if you look at older articles from 1999 or 2000. There you’ll find many articles strongly attacking Ayn Rand’s former associate Alan Greenspan-but not because he has abandoned his former hard money stance. No quite to the contrary, in true supply-sider fashion he was attacked for not being inflationist enough. Of course, in true supply-sider fashion they profess to be anti-inflation only to go on to attack the Fed for not lowering interest rates and increasing the money supply.

Randian Andrew West even explicitly rejects the Austrian school in a double article from January 2000. In the first part he briefly describes ABCT only to reject it without explanation. In the second part he does offer a argument (sort of) , namely that “In my view, the Austrian school, at least in its current mainstream manifestation, is perpetually negative, forecasting since the ’80s near-term ruin that has never materialized”. This was written at the height of the tech stock bubble. Instead he endorses the supply-siders and praises their view that the stock market of early 2000 ( i.e. NASDAQ 5000 ) was not overvalued.

And accordingly, they mainly feature supply-siders like West himself, Richard Salsman, Donald Luskin and James Glassman.

{ 36 comments }

Roderick T. Long February 3, 2005 at 5:17 pm

It’s ironic that the most holy-writ Randians would attack the ABCT, because Rand’s article “Egalitarianism and Inflation” (anthologized in Philosophy: Who Needs It) defends what at least looks pretty close to being a version of the ABCT.

Vanmind February 3, 2005 at 5:40 pm

Millions of people now read Atlas Shrugged during their impressionable youth, become pop-culture “Randians,” then years later–when they discover that a previous economist name Mises talked the free-market talk while Rand was still trapped in Russia–convince themselves that “something must be wrong with this Mises guy’s ideas because otherwise we would have heard of them before.” The journey from there is short to reach the conclusion: “If we can just convince enough people to ignore Mises, more will take up the ‘Rand, Rand, Rand’ mantra.”

For any cult’s faithful, evidence of previously-existing “stuff” becomes instant heresy.

Justin Matz February 3, 2005 at 7:08 pm

I find this segment to be a bit interesting. I have noticed quite a few contradictions with Rand sites and economists claiming to be her devotees. Of course, then I come to the Mises site and see a lot of stuff about the Civil War (with no one wondering how these are connected and even fewer people wondering why all these apparant “southern apologists” are attracted to it).
Bottom line – you have to think for yourself. Being a member of a “Mises Cult” is just as bad as being a member of the “Rand Cult”… why? Because in either case you take what is fed to you and abandon the process of thinking for yourself.

Roderick T. Long February 3, 2005 at 7:32 pm

> when they discover that a previous
> economist name Mises talked the
> free-market talk while Rand was
> still trapped in Russia–convince
> themselves that “something must be
> wrong with this Mises guy’s ideas
> because otherwise we would have
> heard of them before.”

Could be the case with some Randians, but the folks at ARI have presumably read every word Rand ever published, so they at least would surely have known of Rand’s enthusiastic endorsement of Mises’ eocnomics.

Roderick T. Long February 3, 2005 at 7:43 pm

On Justin’s comment: One difference is that ARI is officially committed to agreeing with virtually everything Rand ever wrote (see Leonard Peikoff’s pronouncements on this), so departures from Rand’s views on Mises — or on anything — are incongruous. By contrast, the Mises Institute isn’t committed to agreeing with Mises on absolutely everything, and, unlike ARI, doesn’t impose a standard of ideological conformity.

Vanmind February 3, 2005 at 8:19 pm

Yeah, Roderick, I was generalizing about the majority people who read only Atlas Shrugged.

About the Civil War: I am Canadian so that 140+ year old war means little to me other than its connection to the rise of debt-based corporatism (plus–I suppose–the fact that I grew up about 10 miles from what is presumed to be the settlement inspiration for “Uncle Tom’s Cabin”).

Lowell R. February 3, 2005 at 8:20 pm

Does anyone remember an article in Liberty some years back (I believe in 1999) accusing the Mises Institute of … well, “impos[ing] a standard of ideological conformity”? Personally, I disagree (the Institute’s support of a heterodox like George Reisman is proof enough), but I wonder if anyone else has a different stance…?

– Lowell R.

Ohhh Henry February 3, 2005 at 9:11 pm

From the first part of West’s capmag.com article:

Though I agree with Austrian economics advocacy of free banking and the gold standard, the school’s analysis of money supply is flawed.

Why would he accept the prescriptions of the Austrian school if he rejects the analysis that supports the prescriptions?

From the second part:

“Supply-side forecasts have tended to be more accurate than those of others schools over the years, and that alone should give them a more prominent position among those seeking near-term economic answers.”

No references, no hyperlinks, no hints at all as to which supply-siders have given “more accurate” forecasts. No comments section in which assertions can be challenged and defended.

You can call Misesians cultists if you wish, but as scholars they have it all over the Randians.

P.S. The journal’s slogan is an oddly convoluted way of saying, simply, “Liberty”:

“Individual rights are the means of subordinating society to moral law.”

Roderick T. Long February 3, 2005 at 9:30 pm

For any position that has been claimed to be part of the Mises Institute “standard of ideological conformity,” I’m pretty confident that I can find someone who works, writes, and/or lectures for the Mises Institute who doesn’t hold that position (unless it’s some very general thing like “classical liberalism of some sort” or “at least a semi-Austrian approach to economics” — I doubt anyone would be interested in something called the Ludwig von Mises Institute without that much agreement).

I very much doubt that ARI could come close to passing a similar test.

(Of course ARI would say that’s a fact in their favour — that the only reason libertarians are more tolerant of diversity is that we’re all agnostics or nihilists or something.)

Stephan Kinsella February 4, 2005 at 1:42 am

I listened a few years ago to a taped lecture by Salsmann that a Randian friend insisted I borrow. His criticisms and caricatures of Mises in there are just ridiculous. It is very common of Randians to provide unfootnoted, uncritizable commentary in audio lectures instead of in dissectable printed articles.

On a related matter–the same friend recently loaned me his tape of a Q&A session on Objectivism and Economics with Harry Binswanger and Yaron Brook at some recent ARI conference. I found it interesting, even though I don’t agree with all of their views (including some of their caricatures of the Austrian method). But one thing I was a bit surprised about was that both seemed very dismissive of the idea of 100% reserves (without giving reasons). Both are in favor of the gold standard and freebanking, but both apparently endorse the idea of fractional reserve banks. They seem to think the idea of 100% reserves is ridiculous.

I was not aware of any developed Objectivist economics reasoning on this, and refreshed myself with what Capitalism, the treatise by George Reisman, the preeminent Objectivist economist, has to say (see p. 514 et pass.). I tend to agree with his formulation, but it seems contrary to that of Binswanger and Brook (and Salsman too, I would expect). To paraphrase Karlsson, rather typical that Randians they would choose to deviate in one area where Objectivism (Reisman) was right.

David February 4, 2005 at 2:16 am

This is pure dishonest slander.

Even if we assume for the moment that the articles on CapMag advocates outright socialism, by what process does that become the “official” Objectivist position? There are dozens of Objectivist websites on the web, and selecting a few articles you disagree with on one of them does not magically make them ARI’s official position. CapMag gets their articles from dozens of mainstream media sources, and presents a wide variety of different views – something that is obvious from looking at the website, since there are often articles arguing opposing positing on it. “Cult-like” indeed.
Did you bother looking at what the Ayn Rand Institute actually advocates?

Furthermore, your claim the Salsman article you linked advocates inflationary policies, or any Fed policies for that matter, is a lie. It explicitly advocates free banking and the gold standard, as virtually all Objectivist economists do. Did you even read it?

In fact, there is no Objectivist position on economics because Objectivism is a philosophy, not an economic theory. Economics is a specialized science and any economic views by any Objectivist, including those of Ayn Rand, are not Objectivism just as her tastes in art or views on psychology are not.

It is simply not true that most Objectivists have abandoned Mises. To the extent that they expound on economic theories at all, the vast majority are more Austrian than most libertarians. Leonard Peikoff and Harry Binswanger, the two preeminent ARI Objectivists both advocate Mises. Have you ever heard of John Ridpath, Andrew Bernstein, and Robert Garmong? These ARI affiliated philosophers also recommend Mises as essential reading.

People like you, not Objectivist views on Mises is the reason why there are no links to the Mises Institute on Objectivist websites.

Neil Parille February 4, 2005 at 6:01 am

Mr. Kinsella,

In Rand’s “marginalia” (comments she wrote in books she read) that the ARI published a few years ago, she has extensive comments on the methodological sections of Human Action. She didn’t understand Mises well (and certainly didn’t try to understand him).

Although I haven’t listened to many ARI tapes, there doesn’t seem much published material by ARI on many subjects. This may have to do with fear of the ARI establishment. A few years ago Alan Gotthelf published a book on Rand that reads like a religious tract in praise of her, and Leonard Peikoff even found a reason to attack it.

Roderick T. Long February 4, 2005 at 7:40 am

I also recall that Tara Smith’s book Viable Values was criticised by ARI not for its content (Smith is a pretty orthodox Randian endorsed by ARI) but for having a style that was too academic/scholarly!

The ARI attitude toward the academic establishment is puzzling. On the one hand they seem interested in being taken seriously in academia; they send free books to philosophy departments all over the country, they have a table set up at the American Philosophical Association meetings with free literature. On the other hand they publish books with snide remarks about academics, and the main free book they hand out at the APA looks like a Hare Krishna production — Rand’s face surrounded by glowing sunbeams — and its content is oddly chosen to appeal to academics also.

Roderick T. Long February 4, 2005 at 7:48 am

> In fact, there is no Objectivist
> position on economics because Objectivism
> is a philosophy, not an economic theory.
> Economics is a specialized science and any
> economic views by any Objectivist, including
> those of Ayn Rand, are not Objectivism

So if some Objectivist were to claim that free markets cause poverty and depressions, and that only massive government regulation can ensure prosperity, there would be no conflict with Objectivist principles there, because that’s just an economic issue? I find that hard to believe. Maybe Objectivism doesn’t take a position on some of the precise minutiae of economic theory, but surely it endorses some views in the area of economic theory.

Stephan Kinsella February 4, 2005 at 8:47 am

David wrote (in response to someone else):

It is simply not true that most Objectivists have abandoned Mises.

I listened to the Salsmann tape a few years ago, admittedly. But I distinctly recall him severely attacking Mises and dismissing most of his views in a very shocking way. As I recall, he much prefers Menger, and Adam Smith. I believe he is an ARI endorsed type of economist, but I cannot recall the specifics.

Furthermore, your claim the Salsman article you linked advocates inflationary policies, or any Fed policies for that matter, is a lie. It explicitly advocates free banking and the gold standard, as virtually all Objectivist economists do. Did you even read it?

David, as far as I konw, there are two types of “free bankers”–100% reserve and fractional reserve. Some Austrians (and I agree with them) believe fractional reserve leads to money supply and price inflation, and other problems. The distinct impression I got from the Brook/Binswanger discussion (and I assume Salsmann would take this view too) is that they are pro gold standard and pro free banking, but also opposed to 100% reserve requirements. I was shocked by this not only because I believe it is economically misguided, but because it seemed to be a change in the Objectivist view on this given Reisman’s sound explication in Capitalism (and probably earlier writing) of the reason why fractional reserve is problematic. What I found even more shocking was the offhand way Binswanger and Brook derided the 100% reserve advocates, as if it’s obvious to everyone why that’s wrong. They seemed to joke and laugh about it as if the 100% reserve types are not only kooks, but obvious kooks. I was simply unaware that any Objectivists really disagreed on this issue, especially since Reismann seemed to essentially agree with the 100% reservers himself. I am not implying there is any official Objectivist view on it, just that it was a bit surprising to me. But as far as I can tell, several prominent Objectivists do favor fractional reserves, which is of course inflationary and has other problems too.

Stefan Karlsson February 4, 2005 at 8:51 am

David: There might be some ARI-Randians who still uphold Mises and more specifically his most important theory and the one who is most strongly at odds with supply-side economics, the Austrian Business Cycle Theory (ABCT), but if there are, they aren’t published on Capitalism Magazine. Of course, they might be published in some other ARI-affiliated journal which I don’t read (Capmag is about the only one I read since I don’t belong to the ARI) and if you can provide an example of that you would have a much stronger case. And again, I’m not just talking about saying “Mises is good” in some broader sense, I’m talking about endorsing ABCT and rejecting the inflationist supply-side view on monetary issues.

And yes, it is true that they publish some articles written by non-Randians like Walter Williams and James Glassman, but as far as monetary issues go insofar as they are mentioned they always take the supply-side view and not the misesians. And the Randians which are published, like Richard Salsman and Andrew West all favor the supply-side view. So it is clear that at least Capmag does favor the supply-side view.

While supply-siders, including Richard Salsman and Andrew West, do pay lip-service to the idea of a gold standard but that gold standard is a phony one, which does not in anyway mean that the supply of money or even the monetary base should be limited by the supply of gold, but that the government should try to adjust its monetary policy after the movements of the gold price. And in practice the supply-siders only stay true to even that shallow commitment when the gold price is falling, like it did in the late 1990s, and when it thus imply calls for increased money supply , not when the gold price is rising as in recent years and would thus imply a sharp tightening of monetary policy.

Salsman’s analysis ( http://capmag.com/article.asp?ID=283 ) is of course very confused even for being a supply-sider in that he first attacks Greenspan for raising interest rates only to proceed to (correctly) blaming him for inflation, even though anyone even remotely familiar with economics should know that higher interest rates other things being equal implies a tighter monetary policy which in turn of course implies limiting inflation, but as his main theme is attacking Greenspan for pursuing a too tight monetary policy he advocates a policy inconsistent with a true gold standard.

Dennis Sperduto February 4, 2005 at 12:12 pm

Regarding the Mises Institute and ideological conformity. The Mises Institue is performing an extremely important service by making Misesian economics more widely available and in providing support for scholars working in this tradition. All too often, Mises’s writings are either ignored or mischaracterized, or they are, without reasonable justification, derogatorily labeled. Or it is claimed that what is correct in his analyses has already been subsumed in someone else’s, or some other school’s, thought. Despite the economics profession’s treatment of Mises and given the Mises Institute’s mission, I believe that the Mises Institute has been quite accommodative of individuals holding positions not in full accord with those of Mises. If only academia in general and the economics profession in particular operated with the overall level of academic integrity that the Mises Institute displays.

Greg Feirman February 4, 2005 at 2:31 pm

I want to comment on two topics here. One is the endorsement of Mises by Rand and Randians. The other is those ridiculous articles from Capitalism Magazine.

I don’t think there can be any doubt that Objectivists for the most part endorse Ludwig von Mises as a great, perhaps the greatest, economist and recommend reading his books. As Roderick Long pointed out, citing Barbara Branden’s biography of Rand, Rand herself had a personal campaign to get von Mises read. Her book “Capitalism: The Unknown Ideal” quotes his work many times and lists all of his books as recommended reading, among a select list of others. Even Peikoff endorses von Mises: “There are flaws in classical economics, to be sure, and even in its best modern heir, the Austrian school as represented by Ludwig von Mises” (Objecitism: The Philosophy of Ayn Rand, p. 379).

Having began my intellectual journey by reading Atlas Shrugged, I can say from personal experience that the path from there to Human Action and other books by von Mises is a very short and well marked one. After reading Capitalism: The Unknown Ideal, I picked up Human Action, on Rand’s endorsement, and began to work through it. No doubt many others have followed the same path.

Rand herself didn’t agree with everything Mises wrote, such as his a priori methodology, subjectivism and utilitarianism, and I am sure that other Randians pick bones with other of his ideas as well. But this doesn’t amount to not endorsing von Mises, even by contemporary Randians.

At the same time, the articles from Capitalism Magazine, by Objectivist connected economists, do show a laughably ignorant understanding of von Mises ideas (and are just laughable in general).

Salsman criticizes Greenspan for raising rates and destroying “wealth” claiming that: “The problem was Greenspan’s view that prosperity is inherently ‘unsustainable’. Greenspan believes prosperity sows the seeds of its demise. He insists that economic growth breeds inflation.” I doubt Greenspan believes anything of the sort. What he believes is that credit expansion fueled asset bubbles eventually lead to consumer goods inflation and are thus unsustainable. It’s not prosperity but fiat money fueled “prosperity” that is “inherently unsustainable”. And he’s right. Salsman’s problem is that he thinks the stock market’s valuations at the time of his writing (March 2000) were rational and based on a strong economy: “We have only Greenspan to blame for the drop, because there’s nothing wrong with the American economy. Growth is strong, corporate earnings are up, inflation is down, job creations is robust. Rising stock prices reflect this good news…. The market is an efficient mechanism for valuing companies.” A few months earlier, the pre-eminent Objectivist economist George Reisman had a more Greenspan friendly explanation for the stock market’s large gains:

http://www.capitalism.net/articles/stockmkt.htm

Reisman wrote: “This increase in demand in turn has been the result of the repeated pouring into the market of large sums of new and additional money, created by the banking system under the umbrella of the Federal Reserve System and related government intervention……. What this means is that stock prices have been rising on the foundation of nothing more than an increase in the quantity of money.” It says that Salsman, many of whose articles I read long ago in the Intellectual Activist, is president and chief market strategist of InterMarket Forecasting – how’s that going for you Rich? What about all your dogmatic Objectivist clients? LOL

Andrew West makes a similar mistake in his article criticizing Austrians as follows: “Followers of the Austrian school are typically quite negative about current conditions. Most think we are in a huge credit expansion and money supply growth is temporarily “inflating” asset prices rather than consumer prices. They expect this situation will reverse; that stock prices will fall and consumer prices will rise, and also suggest that this reversal would have happened already if not for mass-euphoria (a bubble), and/or ever-increasing liquidity from the Fed.” In his second article he continues: “In my view, the Austrian school, at least in its current mainstream manifestation, is perpetually negative, forecasting since the ’80s near-term ruin that has never materialized.” Well, a couple months after he wrote his brilliant piece (Jan 25, 2000) it “materialized” in the form of implosion of the NASDAQ even though “supply side forecasts have tended to be more accurate than those of other schools over the years”. And I doubt we are through with a declining stock market just yet.

Though I have to agree with him in his endorsement of “rational economics”: “… a wider understanding of rational economics [plus supply-side economics] best explains inflation and economic growth.” I guess one problem with other schools of thought, on this view, is their endorsement of irrational economics. Reason is man’s tool of survival and only way of understanding the world. Any abdication of reason is a refusal to see, a whim worshipping desire to annihilate reality and replace it with one’s own pathetic wishes. Other schools that endorse irraational economics, therefore, cannot hope to understand reality. A is A, after all. I guess if you just say “rational” and “reason” and “reason-based” alot then your arguments are good. Objectivists are such poweful reasoners, no one can doubt that.

How to sum up? No doubt Objectivism, especially Rand herself, endorse von Mises and Austrian Economics. But this is more at the abstract level of theory: free markets, gold, even business cycle theory. But the application of ABCT to the real world, to forecasting, is another matter. Doing so requires immersing oneself in a huge amount of concrete facts in an immensely complex economic world. Even those who make this effort sucessfully would agree that it’s much more of an art than a science. So I suppose its easy to endorse ABCT in theory and fail to understand how it applies to the current situation, in practice.

Dale February 4, 2005 at 3:12 pm

Some of the most fruitful debates are often with people who share our principles and disagree either on the evidence or the conclusions. Eliminating dissent within an organization squelches that. This blog has provided me with innumerable excellent ideas largely because it fosters a culture of polite debate. I fear nothing worse in commenting here than that having done so publically, I will be shown that my ideas were wrong in public. If the Mises Institute has made any attempt to enforce conformity, I certainly haven’t seen it here.

David February 4, 2005 at 10:36 pm

“Maybe Objectivism doesn’t take a position on some of the precise minutiae of economic theory, but surely it endorses some views in the area of economic theory.”

Objectivism endorses certain positions in political philosophy, such an absolute and negative view of individual rights, and the morality of free trade versus the immorality of parasitism. However, these are philosophical, not economic principles. Economic conclusions necessarily proceed from ones basic philosophic foundation, but they are not philosophical positions as such, and it is therefore unreasonable to condemn a philosopher for having incorrect economic views – as long as he shares the basic philosophical principles.

David February 4, 2005 at 10:49 pm

“But I distinctly recall [Salsmann] severely attacking Mises and dismissing most of his views in a very shocking way.”
I did not defend Salsmann, I only stated that he shares basic principles, and is not represenative of Objectivism qua philosophy, since ARI does not endorse particular economic theories.

“The distinct impression I got from the Brook/Binswanger discussion (and I assume Salsmann would take this view too) is that they are pro gold standard and pro free banking, but also opposed to 100% reserve requirements.”
I am also opposed to 100% reserve requirements, (though I recognize the dangers of fractional banking) but I don’t consider this as contradictory of Austrian theory.

I also believe that Mises was wrong on a number of topics – but do you know any economist who doesn’t disagree with something he wrote?

Neil Parille February 5, 2005 at 6:24 am

I think the problem with the ARI is the exagerated claims of originality with respect to Rand: Her ideas are completely unique, her only debt is to Aristotle, everyone else is a mystic, etc.

If that’s your premise then there won’t be any fellow travelers or even writers you can learn from. To the extent that someone agrees with you, that person has to be torn down as a potential threat. Take the ARI view of Libertarians. They are attacked as being nihilists and subjectivists en masse even though most aren’t. Even natural rights Libertarians have to be dismissed as people who don’t have anything in common with Objectivists.

Objectivists want to be taken seriously in the academy because that’s what Rand wanted. But, as Prof. Long notes, who is going to take them seriously when they are so obsessed with attacking others?

Stephan Kinsella February 5, 2005 at 2:03 pm

David:

“The distinct impression I got from the Brook/Binswanger discussion (and I assume Salsmann would take this view too) is that they are pro gold standard and pro free banking, but also opposed to 100% reserve requirements.”

I am also opposed to 100% reserve requirements, (though I recognize the dangers of fractional banking) but I don’t consider this as contradictory of Austrian theory.

Well, I don’t believe in requiring it either. What I should have said was Binswanger/Brook indicated they themselves think the idea of 100% reserves is silly and that fractional reserves are good and the normal way banks would and should be run. They see no economic problem with having fractional reserves.

David Heinrich February 5, 2005 at 2:32 pm

Stephan,

So, you don’t agree with Block, Hoppe, Huelsman, et al., who think fractional reserve banking is inherently fraudulent and has to be criminalized?

Dewaine February 6, 2005 at 1:11 am

As far as disagreements with Mises: Rothbard also disagreed with Mises regarding Mises’s theory of monopoly. (See the preface to Man, Economy, and State, Scholar’s Edition.)

Austrian economists generally tend to present their theories as progressions from the theories developed by prior economists; both Rothbard and Hoppe (I have not read others’ writings as much) credit the past Austrian economists in their writings, and make improvements on those prior or original theories.

A primary goal of Austrian economists is to improve on the thought of prior Austrian economists, and good Austrian economists develope the lines of thought extending to us from the past. AE theory is not based on a person, not even on Mises, even though the Institute carries his name; AE theory is “good” theory, of which there can never be too much.

Crosbie February 6, 2005 at 5:41 am

Maybe this going a little bit off-topic, but didn’t Mises write favourably of fractional-reserve banking, at least in The Theory of Money and Credit, Chapter 17 ?

If metallic money is employed, then the advantages of a diminution of the demand for money due to the extension of such other means of payment are obvious. In fact, the development of the clearing system and of fiduciary media has at least kept pace with the potential increase of the demand for money brought about by the extension of the money economy, so that the tremendous increase in the exchange value of money, which otherwise would have occurred as a consequence of the extension of the use of money, has been completely avoided, together with its undesirable consequences.

A. Kupi February 6, 2005 at 11:08 am

Well, I believe in letting money settle itself out. In a truly free world, you might be able to sue a bank in private court for issuing credit that is not fully backed, unless they specifically say that they issue fractional-reserve credit, in which case they are not defrauding anyone.
I think competition would drive reserves near 100%, with perhaps some inflation to cover bankers fees… which isn’t really a problem, since the media is in that case, “backed” so to speak by the labor of the bankers.
Gold would probably be used as an inter-bank exchange currency.
But I don’t know for sure what would happen. I just want to let people hash it out for themselves what is or isn’t money, without governmental interference, and whatever develops will be the “right” kind of money.

Stephan Kinsella February 6, 2005 at 1:31 pm

Heinrich: “So, you don’t agree with Block, Hoppe, Huelsman, et al., who think fractional reserve banking is inherently fraudulent and has to be criminalized?”

I think I don’t. If it is disclosed clearly enough, I am not sure I see any fraudulent act being committed. I would need to be persuaded there is a given, concrete person who is a victim of fraud necessarily, due to fractional reserve banking–and a given coherent, precise definition of fraud given.

Chris Matthew Sciabarra February 7, 2005 at 6:57 am

With regard to this discusssion, Larry J. Sechrest and I have written an introduction to a forthcoming symposium in The Journal of Ayn Rand Studies, which discusses briefly this “Anti-Austrian turn” among certain Objectivist writers. As Sechrest and I argue: “In the last year, for example, the criticisms leveled at Austrian theory by [Richard] Salsman in particular might be characterized as ‘revisionism,’ a virtual repudiation of the close intellectual relationship that has existed between Objectivism and Austrianism.”

This repudiation is on display in a recent series of articles that Salsman has published in The Intellectual Activist; it takes aim specifically at the Austrian theory of the business cycle.

The symposium for which our introduction is written is of particular value to both Austrians and Objectivists. Entitled “Ayn Rand Among the Austrians,” it is the first anthology of essays– featuring writers as diverse as George Reisman, Walter Block, Steve Horwitz, Pete Boettke, Ed Younkins, and many others–that constitutes a critical engagement between these traditions. I will have a lot more to say about this as we near publication; suffice it to say… it is the second of two symposia in celebration of the Ayn Rand Centenary.

More to follow…

Theseus February 7, 2005 at 10:23 pm

David writes: “People like you, not Objectivist views on Mises is the reason why there are no links to the Mises Institute on Objectivist websites.”

I really laugh at a sad cultist loser like David daring to post to a forum like this. Unlike the Talibani ARI, CapMag, and ObjectivismOnLine.Net, this site has no evil loyalty oaths,
onerous moderation rules, or rank censorship. It’s just free open honest discussion — and clearly any pathetic ARI zombie is out of his element. In a place where only thoughtful commentary and reasoned argument apply, no braindead, soulless, sadsack ARI cultist can long survive.

The REAL reason there’s no links on those ARI-type websites is that they desperately wish to maintain their authoritarian, collectivist, conformist, faith-based cult. Any organization which might challenge their idiosyncratic, bizarre, warped, sick, ideological house of cards is a threat.

My advice to Davey-boy is simple: Put your tail between your legs, like a whipped dog, and whimper back to Randroid-land with as much dignity as you can fake.

Max February 8, 2005 at 4:02 am

I have no comment to the clash of debate culture between the ARI and the Mises group, but rather on the context of economics (which the article reminded me of).

Why do so many people here advocate Gold or Silver as means to pay?

Wasn’t this abolished as to the end that Gold and Silver would be once again usable to the producers of computer chips and such?
Because Gold and Silver is rather a limited ressource and if it still were payment, it’d be short for the production of such everyday goods? (which were much more expensive, because of the lower availability of the ressource silver/gold)

Fat Slim February 8, 2005 at 8:17 am

“this site has no evil loyalty oaths”

Tell that to John T. Kennedy.

See here: http://tinyurl.com/69mjl

OO June 4, 2005 at 12:28 pm

Theseus,

“In a place where only thoughtful commentary and reasoned argument apply…”

For a moment I thought you were referring to this blog, but as I read on….

“…laugh at a sad cultist loser like David… pathetic ARI zombie… braindead, soulless, sadsack ARI cultist… bizarre, warped, sick, ideological house of cards… Put your tail between your legs, like a whipped dog, and whimper back to Randroid-land with as much dignity as you can fake…”

…I realized of course that you must have been referring to something else completely. Would you be so kind as to post a link to the website where I could find thoughtful commentary and reasoned argument? Thanks so much in advance.

Don't jump to conclusions June 4, 2005 at 12:34 pm

Don’t assume that Salsman in any way represents the “Objectivist” view on economics (which doesn’t exist beyond advocating free markets) or even the “ARI” view. There are many ARI supporters who are strong Mises admirers, and who disagree vehemently with Salsman’s views on economics.

Paul Edwards July 12, 2006 at 1:01 pm

Stephan,

“Well, I don’t believe in requiring it [having fractional reserves] either.”

…

“I think I don’t [agree that fractional reserve banking is inherently fraudulent]. If it is disclosed clearly enough, I am not sure I see any fraudulent act being committed. I would need to be persuaded there is a given, concrete person who is a victim of fraud necessarily, due to fractional reserve banking–and a given coherent, precise definition of fraud given.”

I see showing the fraud as a two stage proof, first we show that there is a false and legally impossible misrepresentation of warehouse receipts giving concurrent title to the same money to two separate individuals (i.e. counterfeit) and then secondly, we show through the praxeological reasoning regarding the necessary nature of money, and the empirical evidence that fractional reserve banking is performed in currency X, and that the victims also do business in currency X, that they are therefore NECESSARILY harmed by this activity in a number of ways including disruptions in their lives due to business cycles, decreases in their purchasing power, instability in their money, induced dislocations in the economy’s capital structure etc, which they suffer from and do not consent to.

This is not similar to someone competing with you by putting up a store next to yours and lowering the value of your operation. It is much more similar to a very simple private counterfeiting operation, which is fraudulent and unlawful, devaluating your currency and essentially stealing goods from the general consumers not involved in the counterfeiting operation. We know via praxeological reasoning that people in general are harmed by this, even if no individual is able to stand up and demonstrate how he was personally directly harmed by this activity.

Tom Rapheal July 12, 2006 at 3:31 pm

I am 16 and read Capmag, Mises and Reisman’s blog. The differences in Economics bettween the three sites are negible. Personally I belive in seperation of the state and the Economy and I haven’t dissagreed with Reisman yet. Most differences are in foreign policy: capmag genrally is more of a “don’t mess with me or I’ll blow your head off” and mises “lets just fight on our own soil” I’m not sure witch one to agree with. Reisman dosen’t talk about foreign policy. All three sites are great sites. And capmag does have differences in opinoin.71

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