Back in the 1990s there was a fascinating debate carried on among various Austrians, mostly in the pages of the Review of Austrian Economics (RAE) or Quarterly Journal of Austrian Economics (QJAE), on the issue of fractional-reserve banking and so-called free banking. On the one hand were Rothbardians such as Hoppe, Hülsmann, Huerta de Soto, and Salerno; on the other, supporters of freebanking such as Selgin, White, Dowd, and Horwitz. The Rothbardians believe fractional-reserve banking is unstable and fraudulent; the free bankers disagree. My own take is that the Rothbardians are right on the economics, although I think the fraud charge could be obviated with sufficient warnings to customers and recipients of FRB notes.
I’ve compiled below a chronological listing of these pieces, and a few other works, with links to online versions, where available, for those who feel like reading up on this interesting issue. This is basically a (skeletal) ebook.
If anyone is aware of any significant material I have omitted, please let me know.
Update: I’ve combined most of the “main debate” and “subsequent discussion” files into a single PDF.
Background material:
- Mises, The Theory of Money and Credit (1912) and Human Action (1949)
- Rothbard, The Mystery of Banking (1983/2008) and The Case for a 100 Percent Gold Dollar (1962) and “The Case for a Genuine Gold Dollar”, 1985
- “The Gold Standard and Fractional-Reserve Banking”, Joe Cobb, September 1975
- “Gold versus Fractional Reserves”, Henry Hazlitt, May 1979
- “Gold and Free Market Banking” (video), Lawrence H. White, “The Gold Standard: An Austrian Perspective” Conference held in Washington, DC, November 16-17, 1983
- Lawrence H. White, Free Banking in Britain: Theory, Experience, and Debate, 1800–1845 (1984) and Competition and Currency: Essays on Free Banking and Money (1989/1992)
- Larry J. Sechrest, White’s Free-Banking Thesis: A Case of Mistaken Identity, RAE, Vol. 2 (1988)
- George Selgin, The Theory of Free Banking (1988)
- Rothbard, The Myth of Free Banking in Scotland, RAE (1988)
- Joseph T. Salerno, Mises and Hayek Dehomogenized, RAE, Vol. 6, No. 2 (1993)
- Block, “Fractional Reserve Banking: An Interdisciplinary Perspective,” in Man, Economy and Liberty: Essays in Honor of Murray N. Rothbard (1988)
- “Fractional versus 100% Reserve Banking”, Morris J. Markovitz, June 1988
- Steven Horwitz, Monetary evolution, free banking, and economic order (1992)
- Sechrest, Free Banking: Theory, History, and a Laissez-Faire Model (1993)
- Review by John Cochran
- Kevin Dowd, Laissez Faire Banking (1993)
Main debate:
- Hans-Hermann Hoppe, How is Fiat Money Possible? or, The Devolution of Money and Credit, RAE, Vol. 7, No. 2 (1994)
- Jesús Huerta de Soto, A Critical Analysis of Central Banks and Fractional-Reserve Free Banking from the Austrian Perspective, RAE, Vol. 8, No. 2 (1995)
- Jörg Guido Hülsmann, Free Banking and the Free Bankers, RAE, Vol. 9, No. 1 (1996)
- Walter Block & Kenneth Garshchina, Hayek, Business Cycles and Fractional Reserve Banking: Continuing the De-Homogenization Process, RAE, Vol. 9, No. 1 (1996)
- Parth J. Shah, The Option Clause in Free-Banking Theory and History: A Reappraisal, RAE, Vol. 10, No. 2 (1997)
- Hoppe, with Hülsmann & Block, Against Fiduciary Media, QJAE, Vol. 1, No. 1 (1998) (reprinted as ch. 7 of Hoppe’s Economics and Ethics of Private Property)
- Pascal Salin, Free Banking and Fractional Reserves: A Comment, QJAE, Vol. 1, No. 3 (1998)
- Hülsmann, Free Banking and Fractional Reserves: Response to Pascal Salin, QJAE, Vol. 1, No. 3 (1998)
- “Why Private Banks and Not Central Banks Should Issue Currency, Especially in Less Developed Countries”, Lawrence H. White and George Selgin, April 19, 2000
- “Should We Let Banks Create Money?”, George Selgin, Summer, 2000
- “Banks Cannot Create Money”, Jorg Guido Hulsmann, Summer 2000
- Jeffrey M. Herbener, Ludwig von Mises on the Gold Standard and Free Banking, QJAE, Vol. 5, No. 1 (2002)
- White, Accounting for Fractional-Reserve Banknotes and Deposits—or, What’s Twenty Quid to the Bloody Midland Bank?, Independent Review (Winter 2003)
- Hülsmann, Has Fractional-Reserve Banking Really Passed the Market Test? Independent Review (Winter 2003)
- “Legal Tender Laws and Fractional-Reserve Banking”, Jorg Guido Hulsmann, Summer 2004
- “Hayek’s Plan for Private Money”, Robert P. Murphy, July 18, 2005
Two books that came out after the initial debate had mostly died down:
- Huerta de Soto, Money, Bank Credit, and Economic Cycles (2006)
- Hülsmann, Theory of Money and Fiduciary Media (2012)
Subsequent/other blog discussions and articles:
- Jeffrey Rogers Hummel, “Why Fractional Reserve Banking Is More Libertarian than the Gold Standard” (FEE lecture, July 15, 2008; audio) (see Hummel’s description here)
- Block, Walter Block versus Bryan Caplan on Fractional Reserve Banking, LewRockwell.com (Nov. 1, 2008)
- Block, Is Fractional Reserve Banking Fraudulent?, LewRockwell.com (Nov. 6, 2008)
- “100 Percent Reserve Money: The Small Change Challenge”, George Selgin, March 2009
- “The Case Against the Fed Book Review”, Randy Radic, May 19, 2009
- Peter Boettke, Mises and Free Banking — Why Is There a Debate?, Coordination Problem blog [formerly Austrian Economists blog] (May 7, 2010)
- Steve Horwitz, comment on Boettke (May 7, 2010)
- Salerno, Selgin Contra Horwitz and White on Mises’s View of Fiduciary Media, Mises Blog (March 16, 2010)
- Selgin, 100 Percent Reserve Money: The Small Change Challenge, QJAE, Vol. 12, No. 1 (2009)
- Mark Thornton, Short Changing 100 Percent Reserves, QJAE, Vol. 13, No. 2 (2010)
- William N. Butos, Monetary Orders and Institutions: A Hayekian Perspective, QJAE, Vol. 15, No. 3 (Fall 2012)
- Philipp Bagus, Austrian Business Cycle Theory: Are 100 Percent Reserves Sufficient to Prevent a Business Cycle?, Libertarian Papers, Vol. 2 (2010)