17 Jan 2019

BMS ep. 12: Gene Epstein on Commies, Krugman, and Crushing Debaters

Bob Murphy Show 5 Comments

The latest episode is long but we cover a lot of interesting stuff.

5 Responses to “BMS ep. 12: Gene Epstein on Commies, Krugman, and Crushing Debaters”

  1. Ethan says:

    Great episode so far. Would’ve liked to hear why Gene isn’t an anarchist. I’ve never heard him flesh out that issue.

    • Bob Murphy says:

      D’oh! I didn’t even think of that.

      • Ethan says:

        Even so, the episode is fantastic so far, I have about 50 minutes left.

        You have been doing a great job of getting people to go into interesting details of their personal journeys.

        I look forward to it weekly!

  2. Luke says:

    Really enjoyed the episode. I love the long podcasts and am happy when I get to use the pause button and come back to something good.

    If I am to chime in on the section regarding your debate with George, I think what was missing was a discussion of the question of what ought to be done when people demand more cash (or more abstractly, base money)? I think this is the crux of the disagreement on the economics. If I’m not mistaken, this is where George and others adopt a view of monetary equilibrium (influenced by Leland Yeager, I believe) where they think the
    supply of fiduciary media ought to increase to accommodate an increased demand for cash, as opposed to the Misesian/Rothbardian take that any particular quantity of money is sufficient for economic coordination and need not be adjusted.

    To quote George:
    “As used here ‘monetary equilibrium’ will mean the state of affairs that prevails when there is neither an excess demand for money nor an excess supply of it at existing prices. When a change in the (nominal) supply of money is demand accommodating-that is, when it corrects what would otherwise be a short-run excess demand or excess supply-the change would be called ‘warranted’ because it maintains monetary equilibrium.”………”Are adjustments in the supply of loanable funds, meant to preserve monetary equilibrium, also consistent with the equality of voluntary savings, and investment? The answer is yes, they are.The aggregate demand to hold balances of inside money is a reflection of the public’s willingness to supply loanable funds through the banks whose liabilities are held. To hold inside money is is to engage in voluntary saving” – Page 54 of The Theory of Free Banking

    Under this view, increasing cash holdings signals the public is willing to relinquish of present goods to be used in investment. Thus, banks increasing the supply of fiduciary media to offset any excess demand will maintain equilibrium and the “natural” rate of interest. I anticipate a Misesian would dispute this and claim money is itself a “present good” and demanding it does not constitute giving up any present goods to be used for capital investment. If it meant saving in that sense, consumers would have kept it in the banking system, not “hoarded” it. Thus, when free FRB’s increase fiduciary credit to offset this demand, interest rates fall below their “natural” rate and that would carry with it the effects of the business cycle. Like you mention, it would be more limited under a free banking regime, but not gone altogether. George’s view seems to look at base money as a kind of “financial asset” to consumers rather than a present economic good.

    I would love to see you do a podcast (or series of them) on banking, but then again, you got to prep for that Tom Woods debate!

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