What appears
below is a series of letters between me and Bryan Caplan. I regard
Bryan as a brilliant young man, and an important contributor to
libertarianism. He is, however, a bitter critic of all things
concerning Austrian economics (I have a review forthcoming in the
Journal of Libertarian Studies of his recent book, The
Myth of the Rational Voter: Why Democracies Choose Bad Policies;
see this for my critical comment on his gratuitous three page attack
on Austrians as "market fundamentalists"). On the other
hand, in my view, Caplan is fast becoming a rising star among the
neo-classicals; he writes voluminously and negatively about Austrian
economics. But he always spells that name correctly, and, thus,
garners far more publicity for us than would otherwise be the case.
I would vastly prefer that mainstream economists attack praxeologists
rather than ignore us. In that way, they set up targets for us,
and better enable us to break out into the society at large. Indeed,
Caplan has become a sort of one-man industry in this regard, so
calling forth a dozen or so rejoinders to his criticism.
On this, see
the appendix 1 at the end of this article.
The present
debate got started when I read that Caplan had characterized Rothbard’s
position on fractional reserve banking (frb) as "crazy."
Further adding insult to injury, he denotes this position as too
easy of a target to hit out against. Now, I suppose, I think of
Milton Friedman roughly in the way that Caplan regards Rothbard.
Yet, I never characterized Friedman’s views as "crazy"
nor as a "too easy" target. That really got in my craw,
and led me to write to Caplan.
This correspondence
took place during the month of October, 2008. I have edited this
very slightly, e.g., getting rid of some of the ums and aws,
on both our parts, updating the bibliography I had originally sent
to Bryan and Jeff Hummel (the latter was copied on this in its entirety,
but did not contribute to it), etc.
"Yesterday
at the FEE seminar, I got to hear the excellent Jeff Hummel thoroughly
debunk the crazy Rothbardian view that fractional reserve banking
is "fraudulent." It was fun (and funny) lecture, but the target
was too easy."
I infer, then,
that you guys, both of you, have published attacks on the "crazy
Rothbardian view." I'm trying to put together a bibliography
on both sides of this "easy" target, see below. Yet, I don't have
anything from either of you on this list. Please send me the cites
of your pubs debunking the Rothbard-Hoppe view that frb amounts
to fraud, counterfeiting and theft.
Have you guys
even read the other side of this debate?
Best regards,
Walter
See appendix
2, below, for this bibliography
Part II.
From: bcaplan@gmu.edu
Sent:
Monday, October 13, 2008 10:27 AM To:
Walter
Block Cc: jhummel@gguol.ggu.edu
Subject:
Re: frb easy target
If I've published
anything on this, I don't recall. And yes, in my misspent youth
I read lots of defenses of 100% reserves. I even believed them.
If I were going
to write something on this, it would be very short. I'd probably
just quote P&M: – -------------------- No administrator is needed
to prevent non-fraudulent sales; if a man simply sells what he calls
"bread," it must meet the common definition of bread held
by consumers, and not some arbitrary specification. However, if
he specifies the composition on the loaf, he is liable for prosecution
if he is lying.
Part III
From: bcaplan@gmu.edu
Sent:
Monday, October 13, 2008 12:00 PM
To: Walter
Block
Cc: jhummel@gguol.ggu.edu
Subject:
Re: frb easy target
Block:
How about if
a man sells a square circle to a willing buyer? How about if the
contract is incompatible with private property rights, on the basis
of which all contracts are supposed to lie, at least according to
libertarian theory? How about if the "contract" involves two people
each owning 100% of something like a gold ounce (which I take to
be a logical contradiction)?
Caplan: At
worst, this would make a contract void for vagueness, but not "fraudulent."
The more natural response, though, is to interpret apparent contradictions
in contracts charitably.
Block: May
I have your permission to share this correspondence with others?
Caplan: Of
course.
Part IV.
From: bcaplan@gmu.edu
Sent:
Monday, October 13, 2008 1:46 PM
To: Walter
Block
Cc: jhummel@gguol.ggu.edu
Subject:
Re: frb easy target
Caplan:
You're just
being difficult, Walter. If you asked a married couple "Who owns
your car?" many people would say "We both own it. Fully."
You can either berate them for self-contradiction, or interpret
their statement charitably through the usual lens of marital property.
Block:
It is merely
"vague" when two different people have full property rights over
the same identical thing? I don't think so. Look, you and I can
both be PART owners of a car: you use it on odd days, me on even
ones. But we both (logically) cannot be FULL owners of one and the
same car. That is a logical contradiction, an utter impossibility.
But, yet, in frb, there are indeed two different people with FULL
rights to the same thing, a given amount of money. There is simply
no "charitable" way to interpret this.
Part V.
From: bcaplan@gmu.edu
Sent:
Monday, October 13, 2008 2:24 PM
To: Walter
Block
Cc: jhummel@gguol.ggu.edu
Subject:
Re: frb easy target
Caplan:
[Sarcasm.]
Then I guess it's time to invalidate millions of marriages as well
as frb for their contradictory assignment of property rights.
Block:
Two people
can no more FULLY own a car than there can be two people in the
same identical place. Married couples typically SHARE ownership
in cars they don't, they CAN'T, both fully own it.
Let me try
again on this. Under libertarianism, rights cannot conflict. If
there is any conflict, there is an improper specification of rights.
But, if A (husband) and B (wife) each fully own a car, then there
IS a conflict in rights. Each has a right to do with the car what
he or she wants. Now, there may not be an ACTUAL conflict, if they
both want the car used for the same purpose. But, there is still
a conflict in RIGHTS. A wants the car used for washing it; B wants
to take it on a trip. They both have a RIGHT to use the car for
these incompatible purposes. That's frb for you: a contradiction
in terms.
Part VI.
From: bcaplan@gmu.edu
Sent:
Tuesday, October 14, 2008 9:56 AM
To: Walter
Block
Cc: jhummel@gguol.ggu.edu|
Subject: Re: frb easy target
Caplan: I understand
your point. What I'm saying is that you are taking loose ordinary
language too literally. If people in a marriage – or a frb – say
that both sides have "full" ownership of something, they don't literally
mean that, ad it is silly to claim that they are contradicting themselves.
What do they really mean? Roughly speaking, whatever's customary.
Block:
I've failed
to make my point as clear as I should have. Let me try again. I
don't at all agree that in marriages, or in any other kind of partnerships,
the two parties FULLY own the property in question. Rather, they
SHARE ownership. Sometimes the husband, or partner A decides, sometimes
the wife, or partner B decides, for example, how to use the car.
The only way
that both parties can have FULL rights over the car is to have TWO
cars. If they have only ONE car between them, which is the assumption
we have been operating under, how can they each have the right to
FULLY determine the use of the car? Now, it may be, and I certainly
"concede" this, that there may be no conflict in actual use of the
car. A might allow B to fully determine its use. But that is NOT
what I am talking about. I'm not talking about, that is, practicality,
actual use, nothing like that. I am talking about RIGHTS, solely
about rights. I don't know how to say this more clearly: two different
people cannot have full rights to any one thing. Only one person
can.
Part VII.
Block:
I don't really
think that "ordinary language" really applies here. Most people,
married or not, don't think much about frb, property titles, etc.
My sense of ordinary language is that no one, no one at all, speaks
of "full" ownership. Only people like Rothbard, Hoppe, Hülsmann
and me talk about it, and people like you, Hummel, White, Selgin,
deny it.
Consider this:
A deposits 10 ounces of gold in B's bank; B gives A a demand deposit
for these 10 ounces. B turns around and lends C 9 of these ounces,
giving C a demand deposit for these 9 ounces. Thus, A and C both
own full rights to these 9 ounces.
There is now
a problem of over-determination or conflict in rights.
A and C both
have a FULL right to these selfsame 9 ounces of gold. They are both
FULL owners of these 9 ounces.
But, one of
the essences of the libertarian philosophy we share is that there
CANNOT be a conflict in rights. Any seeming conflict is due to a
misspecification or one or the other right. Yet, here, with frb,
we have a GENUINE conflict in rights. Thus, frb is incompatible
with libertarianism.
Note, I am
NOT talking about practicality. It might well be (given no bank
run) that A and C will not ACT incompatibly with one another; that
is, both will not demand that B pay them these 9 ounces, an utter
impossibility. No, I am talking about RIGHTS. Right now, before
any bank run, there is STILL a rights contradiction.
I can't see
my way clear to agreeing with you that these thoughts of mine stem
from "taking loose ordinary language too literally."
Walter Block
as editor: this ends the correspondence between me and Caplan.
Murphy, Robert
P., Robert Wutscher and Walter E. Block. Unpublished. "Mathematics
in Economics: An Austrian Critique."
Stringham,
Edward (2008) "Economic
Value and Cost Are Subjective" in The Handbook of Austrian
Economics, Peter Boettke (editor), Cheltenham, UK:
Edward Elgar Publishing, forthcoming.
Stringham,
Edward, and White, Mark (2004) "Economic
Analysis of Tort Law: Austrian and Kantian Perspectives" in Law
and Economics: Alternative Economic Approaches to Legal and Regulatory
Issues, Margaret Oppenheimer and Nicholas Mercuro (editors) New
York: M.E. Sharpe, 374–92.
Appendix
1, FRB
A. Anti–Fractional
reserve banking (frb):
Barnett and
Block, 2005, 2008; Block and Garschina, 1996; Hoppe, et al. 1998;
Hoppe, 1994; Hülsmann, 2000, 2002a, 2002b, 2003; Rothbard, 1962;
de Soto, 1995, 2001.
Barnett, William
and Walter Block. 2008. "Time deposits, dimensions and fraud,"
Journal of Business Ethics; www.WalterBlock.com/publications
(this one is more radical, in that is characterizes even some time
deposit practices, not merely demand deposit practices, as fraudulent).
Hoppe, Hans-Hermann,
with Guido Hülsmann and Walter Block. 1998. "Against
Fiduciary Media," Quarterly Journal of Austrian Economics,
Vol. 1, No. 1, pp. 19–50.
Rothbard, Murray
N. 1962. "The Case for a 100
Percent Gold Dollar," In Search of a Monetary Constitution,
Leland B. Yeager, ed., Cambridge, MA: Harvard University Press,
pp. 94–136, and Auburn, AL: Ludwig von Mises Institute, 1991.
See also "The Logic of Action One" pp. 364–384.
Sechrest, Larry.
1989a. Review of George Selgin’s The Theory of Free Banking,
Journal of Economics, Vol. XV, 196–98.
Sechrest, Larry.
1989b. "Free Banking vs. Central Banking: A Geometrical Analysis,"
South African Journal of Economic and Management Sciences,
November, Vol. II, 83–97.
(Editorial
interjection on my part: Larry Sechrest passed away today, 10/30/08;
he has contributed significantly to this bibliography. I know that
all members of this debate, and, indeed, all Austro-libertarians,
will join me in offering condolences to his family, and acknowledging
his sterling contributions to the cause of freedom. He was a great
supporter of liberty and Austrian economics. RIP.)
C. Ambivalent
Ambivalent.
These are of interest but there is some question as to on which
side they lie:
Callahan, 2003;
van den Hauwe, 2006, 2008; Williams, 1984.
White,
Lawrence H. 2007b. "
