Barnett and Block (Journal of Business Ethics, 2009 ) attack the heart of modern banking by claiming that the practice of borrowing short and lending long is illicit. While their claim of illegitimacy concerning fractional reserve banking can be defended, their justification lacks substance. Their claim is herein strengthened by a legal analysis of deposits and loans based on Huerta de Soto (Money, Bank Credit and Economic Cycles, 2006 ). A combined legal and economic analysis shows that while lending (...) deposits can be regarded as illicit, the maturity mismatching of loans is legitimate contrary to Barnett and Block’s claim. No over-issuance of property rights is involved with this practice once the distinction between present and future goods is taken into account. However, while the practice is not illicit per se , it is greatly assisted and developed through the presence of a fractional reserve banking system, and can sometimes breed detrimental effects. (shrink)

Barnett and Block (J Bus Ethics 18(2):179–194, 2011 ) argue that one cannot distinguish between deposits and loans due to the continuum problem of maturities and because future goods do not exist—both essential characteristics that distinguish deposit from loan contracts. In a similar way but leading to opposite conclusions (Cachanosky, forthcoming) maintains that both maturity mismatching and fractional reserve banking are ethically justified as these contracts are equivalent. We argue herein that the economic and legal differences between genuine deposit (...) and loan contracts are clear. This implies different legal obligations for these contracts, a necessary step in assessing the ethics of both fractional reserve banking and maturity mismatching. While the former is economically, legally, and perhaps most importantly ethically problematic, there are no such troubles with the latter. (shrink)

In Barnett and Block (J Bus Ethics 88(4):711–716, 2009a), the present authors claim that borrowing short and lending long is fraudulent, and thus ought to be prohibited on legal grounds. Bagus and Howden (J Bus Ethics 90(3):399, 2009) take issue with our ethical analysis. The present paper is our response to these authors; it is an attempt to defend Barnett and Block (J Bus Ethics 88(4):711–716, 2009a) against the very interesting and important, although we believe, erroneous, criticisms (...) of Bagus and Howden (J Bus Ethics 90(3):399, 2009). (shrink)

In Barnett and Block :711–716, 2009a), the present authors claim that borrowing short and lending long is fraudulent, and thus ought to be prohibited on legal grounds. Bagus and Howden :399, 2009) take issue with our ethical analysis. The present paper is our response to these authors; it is an attempt to defend Barnett and Block :711–716, 2009a) against the very interesting and important, although we believe, erroneous, criticisms of Bagus and Howden :399, 2009).

Barnett and Block claim that Bagus and Howden support indirectly the concept of market failure. In this paper, we show that maturity mismatching in an unhampered market may imply entrepreneurial error but cannot be considered a market failure. We demonstrate why fractional-reserve banking leads to business cycles even if there is no central bank and why maturity mismatching does not per se lead to clusters of errors in a free market. Finally, in contrast to the examples provided by (...) Barnett and Block, we assure that maturity mismatching does not imply the creation of two incompatible contracts due to the fungible nature of money. (shrink)

In Barnett and Block (J Bus Ethics 88(4): 711-716, 2009a), the present authors claim that borrowing short and lending long is fraudulent, and thus ought to be prohibited on legal grounds. Bagus and Howden (J Bus Ethics 90(3): 399, 2009) take issue with our ethical analysis. The present paper is our response to these authors; it is an attempt to defend Barnett and Block (J Bus Ethics 88(4): 711-716, 2009a) against the very interesting and important, although we (...) believe, erroneous, criticisms of Bagus and Howden (J Bus Ethics 90(3) : 399, 2009). (shrink)

The present article is a continuation of the debate two sets of authors have been engaging in regarding one type of maturity mismatching: borrowing short and lending long. All four authors had agreed that this practice can set up the Austrian Business Cycle; the present author denies that BSLL would be a legitimate commercial interaction in the free society; Bagus and Howden continue to maintain that it would be licit. Our main criticism of Bagus and Howden is a (...) reductio ad absurdum: that this opens them up to the charge of embracing the doctrine of market failure; this is something highly problematic for the two of them, since all four contributors to this debate are well-known supporters of laissez faire capitalism. (shrink)

In Time Deposits, Dimension, and Fraud (2009), William Barnett and Walter Block argue that by borrowing short and lending long there is an over issuance of property rights. Their article, however, does not fully extend the consequences of their contribution. Once this is done, it becomes clearer that their argument suits a great impediment to banking, becoming a possible reason to support rather than to oppose fractional reserve banking. Bagus and Howden (J Bus Ethics 90(3):399–406, 2009) comment (...) on Barnett and Block (J Bus Ethics 88(4):711–716, 2009), the authors claim that while maintaining the illegitimacy of fractional reserve deposits, borrowing short and lending long it is actually not illegitimate. An extension on Bagus and Howden (2009) will show that their line of argumentation can be applied as a defense of fractional reserve banking as well. (shrink)

In this article we reply to George Selgin’s counterarguments to our article “Fractional Reserve Free Banking: Some Quibbles”. Selgin regards holding cash as saving while we focus on the real savings necessary to maintain investment projects. Real savings are unconsumed real income. Variations in real savings are not [...].

This paper attempts to answer the question of whether or not government is needed to build walkways near bodies of water such as rivers and lakes, or whether private enterprise can supply such needs. In it we argue that the market is indeed capable of instituting such amenities, despite the fact that there are either none such or at most very precious few in existence at the present time. This occurrence is explained on the grounds that government has preempted the (...) market that would otherwise have taken place in this regard. We also claim that the likelihood of private walkways being built is proportional to the population density of the surrounding habitat, on the grounds that privacy in densely populated regions is already compromised, and thus the costs of such walkways is lowered. (shrink)

The debate over gun control has taken place in complete isolation from geographical considerations. It focuses on, for the most part, whether legalization would bring about more or fewer accidental deaths, and murders of innocents, than prohibition, and in the USA on the precise meaning of the second amendment to the Constitution. However, these deliberations, argue the authors of the present paper, can be enriched by incorporating into them a spatial context. When this is done, and they are combined with (...) the property rights philosophy of libertarianism, some very different conclusions are drawn. (shrink)

Much recent research has sought to uncover the neural basis of moral judgment. However, it has remained unclear whether "moral judgments" are sufficiently homogenous to be studied scientifically as a unified category. We tested this assumption by using fMRI to examine the neural correlates of moral judgments within three moral areas: (physical) harm, dishonesty, and (sexual) disgust. We found that the judgment ofmoral wrongness was subserved by distinct neural systems for each of the different moral areas and that these differences (...) were much more robust than differences in wrongness judgments within a moral area. Dishonest, disgusting, and harmful moral transgression recruited networks of brain regions associated with mentalizing, affective processing, and action understanding, respectively. Dorsal medial pFC was the only region activated by all scenarios judged to be morally wrong in comparison with neutral scenarios. However, this region was also activated by dishonest and harmful scenarios judged not to be morally wrong, suggestive of a domain-general role that is neither peculiar to nor predictive of moral decisions. These results suggest that moral judgment is not a wholly unified faculty in the human brain, but rather, instantiated in dissociable neural systems that are engaged differentially depending on the type of transgression being judged. (shrink)

“Paris, Capital of the Nineteenth Century” juxtaposes elliptical descriptions that reveal the interiorization of commodities in the economy of high capitalism. “Allegory in the nineteenth century vacated the outer world, to colonize the inner world.”32 Each of the exposé’s six sections consists of two parts: “Fourier, or the Arcades,” “Daguerre, or the Panoramas,” “Grandville, or the World Exhibitions,” “Louis-Philippe, or the Interior,” “Baudelaire, or the Streets of Paris,” “Haussmann, or the Baricades.”33The commercial arcade and not the factory is the logical (...) starting point for Benjamin. Paris, like London, the other capital of nineteenth-century capitalism, is an administrative and financial but not an industrial center. Paris is the locus classicus of bourgeois culture, which finds its most conspicuous expression in the arcade. The arcade cuts through and commercializes the residential block. It harnesses the technology of cast-iron “Pompeian” pillars, to offer in its enticing bay windows the latest, most sophisticated form of bourgeois merchandising. Fourier houses his “land of Cockaigne” in a “reactionary modification” of the arcade.34Parallel to the technical innovation of the arcades is that of the lifelike painted panoramas, which serve Jacques-Louis David’s pupils when they “draw from nature.” Politically superior, the city still dreams of the country. “The panoramas, which declare a revolution in the relation of art to technology, are at the same time an expression of a new feeling about life.”35 They drive a wedge between “plastic foreground” and “informational base.” The worker in the literary panorama is “a trimming for an idyll.” Technical innovations in photography reduce the representational significance of painting. Now photography “is given the task of making discoveries”: it explores the sewers and catacombs. It markets events. With impressionism and cubism, painting in turn transcends bourgeois conceptions of realism. 32. “Die Allegorie hat im neunzehnten Jahrhundert die Umwelt geräumt, um sich in der Innenwelt anzusiedeln” .33. Adorno objects to the use of people’s names in these titles and suggests that objects like dust or plush would bemore illuminating. Benjamin retains the names to evoke bourgeois interiorization. Louis-Philippe, however, is anomalous, since he is emblem rather than allegorist; the true allegorist of the “Louis-Philippe, or the Interior” section is the collector. Otherwise, the organization is strictly symmetrical: Benjamin discusses Charles Fourier, Louis Daguerre, and Grandville at the end of the sections in which they appear, the others at the beginning.34. Trans. Jephcott, p. 148. “Das Schlaraffenland,” “ihre reaktionäre Umbildung” . Anne Higonnet, formerly a student at the Ecole du Louvre, is a graduate student of art history at Yale University. Margaret Higonnet, professor of English and comparative literature at the University of Connecticut, has written on Romantic and modern literary theory. Patrice Higonnet is Goelet Professor of French History at Harvard University. He has written on the French Revolution and, with Margaret Higonnet, is coauthor of a forthcoming book on suicide in eighteenth-century France. (shrink)

How ethical have recent banking practices been? We answer this question via an economic analysis. We assess the two dominant practices of the modern banking system – fractional reserves and maturity transformation – by gauging the respective rights of the relevant parties. By distinguishing the legal and economic differences between deposit and loan contracts, we determine that the practice of maturity transformation (in its various guises) is not only ethical but also serves a positive social function. The foundation of the (...) modern banking system – the holding of fractional reserves against deposits – is, however, problematic from economic, legal and ethical perspectives. Starting from a microanalysis of money's function, a reassessment of the current laws concerning the practice is encouraged, with the aim not only to rectify economic irregularities but also to realign depositors' rights with the obligations of the banking sector. (shrink)

How ethical have recent banking practices been? We answer this question via an economic analysis. We assess the two dominant practices of the modern banking system – fractional reserves and maturity transformation – by gauging the respective rights of the relevant parties. By distinguishing the legal and economic differences between deposit and loan contracts, we determine that the practice of maturity transformation (in its various guises) is not only ethical but also serves a positive social function. The foundation of the (...) modern banking system – the holding of fractional reserves against deposits – is, however, problematic from economic, legal and ethical perspectives. Starting from a microanalysis of money's function, a reassessment of the current laws concerning the practice is encouraged, with the aim not only to rectify economic irregularities but also to realign depositors' rights with the obligations of the banking sector. (shrink)

Walter Block leaned on 82 of the world's most prominent libertarian thinkers and asked them to tell their life stories with an eye to intellectual development. The result is the most comprehensive collection of libertarian autobiographies ever published. Their stories are thrilling and fascinating. They reveal their main influences, their experiences, their choices, and their ambitions. There are some very interesting lessons here for everyone. We learn what gives rise to serious thought about liberty and what causes a (...) person to dedicate a professional career or vocation to the cause. We also discover some interesting empirical information about the most influential libertarian writers. How people come to believe what they believe is a mysterious issue, but an important one to examine. The results have profound strategic implications for the future. If there is a theme that emerges here, it is that it is that the most powerful and effective message of liberty is the one that is both smart and truth telling, not the one that is evasive or consciously dumbed down. The two most influential libertarians that emerge from the contest here are Rothbard and Rand, and this is for a reason. This volume bears close study by anyone who is considering strategic issues. So far as we know, it is the first book of its kind, one sure to play a larger role in the future crafting of the message and scholarship of human liberty. (shrink)

Depositors have perceived banks as acting unethically during the most recent recession. One area of consternation is the ambiguity of the legal obligations entailed by the deposit contract when it is backed with only fractional reserves. In this article, we apply an existing analysis of the legitimacy and ethicality of banking practices to a wider range of financial transactions, including insurance policies, securities lending, perpetual bonds, and callable loans. Securities lending in particular creates rights violations analogous to those in fractional-reserve (...) banking. Both callable loans and perpetual bonds have clear legal obligations which are not inherently problematic, though we herein clarify what these obligations are. Finally, we apply our ethical framework to demonstrate that insurance products are distinct from banking deposit contracts, and that perceived parallels between the two products underestimate these differences. (shrink)

Business Ethics, the Environment &Responsibility, Volume 33, Issue 3, Page 523-534, July 2024.

The financial crisis has led to new interest in the ethics of financial markets. In this article, we further the debate on the nature of banking contracts by showing that the fundamental subjective purposes of loan and deposit contracts are irreconcilable. Any resultant mixture of the two contracts is a legal aberration. We consider a mutual fund as an important and legitimate alternative to the common demand deposit to provide high liquidity and some yield without offering full availability of a (...) nominal sum. Besides being a close substitute for how many deposit accounts function today, the mutual fund has the additional benefit of satisfying all legal and ethical requirements. Loan and investment contracts allow for the “bank” to make use of their clients’ funds while the intents of money owners are clearly classified without running into legal or ethical problems. (shrink)

In the pages of this journal, a fruitful debate has evolved on the ethical legitimacy of fractional-reserve banking. In this article, we respond to the new arguments raised by Evans as we clarify our position on the unethical and illegitimate nature of fractional-reserve banking. Fractional-reserve banking is not a recent financial innovation but represents a long-standing legal aberration. The co-mingling of two mutually exclusive financial contracts, deposit and loan, confounds the contracting parties’ purposes, intents, rights, and obligations. As a result, (...) it creates unsolvable legal difficulties and ethical dilemmas. While these problems are most evident in the case of a bank run, they also arise when trying to answer the simple question of “who owns a deposit?”. (shrink)

In Block I offered a compromise between the pro choice position that fervently supports stem cell research, and the pro life philosophy which bitterly opposes it. The compromise was a contest: allow would be researchers to create as many fertilized eggs as they wished. But, also, these should be offered up to would be parents to adopt all of these “children” as they wanted. If and only if there were any unadopted fetuses remaining in the laboratories of the nation (...) would it be licit, on libertarian grounds, for research on them to take place. In the present paper I respond to several objections to this “modest proposal.”. (shrink)

Commentators believe that the COVID-19 pandemic reveals the inconveniences of capitalism and that the end of “neoliberalism” could be near. In this article we show that a capitalist ethics is capable to deal with the challenges of pandemics and comes with important advantages such as the prevention of overreactions. We apply both utilitarian and rights-based ethics to the case of epidemics in general and COVID-19 in particular. First a libertarian natural law ethics is used to assess the government interventions in (...) the Corona pandemic. We maintain that these interventions cannot be justified from a libertarian point of view despite of the possible objections that are discussed such as the “potential threat argument”. Moreover, the utilitarian argument in favor of government lockdowns is evaluated. The negative effects of lockdown on mental health, addictions, domestic violence, etc. have to be taken into account. The utilitarian argument in favor of lockdown is far from convincing, as economic calculation is not possible. (shrink)

The growing importance of the cryptocurrency phenomenon has raised concerns about the ethical implications of a hypothetical widespread use of these new forms of digital money. In this paper, we undertake an ethical assessment of cryptocurrencies drawing upon two specific ethical theories: private property ethics and utilitarianism. Particularly, we focus on three distinctive aspects. First, we examine the advantages and disadvantages of cryptocurrencies vis‐à‐vis central bank fiat money. Second, we analyze cryptocurrencies as facilitators of tax evasion and the ethical implications (...) arising therefrom. Finally, we explore the use of cryptocurrencies for nefarious consumption. We conclude that, were cryptocurrencies to become widespread media of exchange, governments capacity to undertake monetary, fiscal, and drug policy would be undermined. We argue that this would be an ethically desirable outcome from both a private‐property‐rights and a utilitarian perspective since it would force governments to reduce their size and scope in these three areas. (shrink)

The growing importance of the cryptocurrency phenomenon has raised concerns about the ethical implications of a hypothetical widespread use of these new forms of digital money. In this paper, we undertake an ethical assessment of cryptocurrencies drawing upon two specific ethical theories: private property ethics and utilitarianism. Particularly, we focus on three distinctive aspects. First, we examine the advantages and disadvantages of cryptocurrencies vis‐à‐vis central bank fiat money. Second, we analyze cryptocurrencies as facilitators of tax evasion and the ethical implications (...) arising therefrom. Finally, we explore the use of cryptocurrencies for nefarious consumption. We conclude that, were cryptocurrencies to become widespread media of exchange, governments capacity to undertake monetary, fiscal, and drug policy would be undermined. We argue that this would be an ethically desirable outcome from both a private‐property‐rights and a utilitarian perspective since it would force governments to reduce their size and scope in these three areas. (shrink)

The growing importance of the cryptocurrency phenomenon has raised concerns about the ethical implications of a hypothetical widespread use of these new forms of digital money. In this paper, we undertake an ethical assessment of cryptocurrencies drawing upon two specific ethical theories: private property ethics and utilitarianism. Particularly, we focus on three distinctive aspects. First, we examine the advantages and disadvantages of cryptocurrencies vis‐à‐vis central bank fiat money. Second, we analyze cryptocurrencies as facilitators of tax evasion and the ethical implications (...) arising therefrom. Finally, we explore the use of cryptocurrencies for nefarious consumption. We conclude that, were cryptocurrencies to become widespread media of exchange, governments capacity to undertake monetary, fiscal, and drug policy would be undermined. We argue that this would be an ethically desirable outcome from both a private‐property‐rights and a utilitarian perspective since it would force governments to reduce their size and scope in these three areas. (shrink)

What role do demand deposits serve in the financial system? The answer to this simple question has great implications in keeping the legal terms of the contract consistent with the demands of the financial system. Demand deposits are a perfect monetary substitute. Since money is only held to hedge against perceived uncertainty in both the timing and magnitude of future expenditures, demand deposits are demanded for the same reason. From this we derive three main conclusions. First, a financial contract similar (...) to a demand deposit cannot substitute for money. Second, full agreement to a financial contract does not create a perfect substitute for money unless it provides money’s two key characteristics: on demand and par value redemption. Finally, the demand for fractional-reserve demand deposits is fostered by an exogenous source and that demand for a good or service is not a sufficient condition to justify its legality or ethicality. (shrink)

Matt Mortellaro’s “Causation and Responsibility: A New Direction” is a brilliant Rothbardian analysis that makes numerous new and important points. It also critiques some of my own previous publications. In this piece I focus on Mortellaro’s rejoinders to me, and set forth a defense of my own positions.

Nozick (1977) was a critique of the view of Austrian economics which rejected the notion of indifference in human action. This author claimed that this stance was incompatible with the notion of the supply of a good, and, also, with diminishing marginal utility, both of which were strongly supported by this praxeological school of thought. Block (1980) was an attempt to rescue the Austrian school from this brilliant intellectual challenge. Hoppe (2005; 2009) rejected Nozick’s challenge, and, also, Block’s (...) (1980) response. Block (2009a) and Block and Barnett (2010), defended Block’s (1980) analysis of indifference. The latest contribution to this ongoing discussion is Wysocki (2021) who maintains that Hoppe was correct in his rejection of Nozick, while Block was not. The present paper is a rejoinder to Wysocki (2021). (shrink)

There are continuum problems in political economy. There are no objective non-debatable solutions to any of them. All answers to them are arbitrary. Responding to these challenges are, ideally, the responsibility of courts, juries, etc.

In this paper we assume the contours of the libertarian philosophy, its view toward the unjustified state, and, also, the punishment theory of this perspective. We address the narrow question of what punishment is justified for partaking in statist activities.

Van Dun rejects private road ownership on the ground that owners will trap homeowners whose property abuts their thoroughfares. The present paper rejects this claim, and demonstrates that a free enterprise system of private ownership will maximize the welfare of householders, not minimize it.

1. Bd. Moralia Horatiana; das ist, Die horazische Sittenlehre, von P. von Zesen.--2. Bd. La doctrine des moeurs, tiree de la philosophie des stoiques, par M. Le R. de Gomberville.

After all, Lee is Professor of Economics and holder of the Bernard B. and Eugenia A. Ramsey Chair of Private Enterprise Economics at the University of Georgia. In addition to holding a named chair in “Private Enterprise Economics,” he is also the former president of the Association of Private Enterprise Educators, a group devoted to not only the study of markets, private enterprise, property rights, and capitalism, but one which is largely, but not exclusively, made up of academic economists with (...) strong free market views and strong skepticism of government actions (it started many years ago as an association of free enterprise chair holders but has expanded to include anyone with a strong free enterprise perspective).2 As well, Lee has been associated with another group that claims a market orientation, the Center for Study of Public Choice, both at George Mason University and at Virginia Polytechnic Institute & State.. (shrink)