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Maturity Mismatching and “Market Failure”

Author

Listed:
  • Walter E. Block

    () (Loyola University New Orleans)

  • William Barnett

    () (Loyola University New Orleans)

Abstract

Abstract The present article is a continuation of the debate two sets of authors (Bagus and Howden vs. Barnett and Block) have been engaging in regarding one type of maturity mismatching: borrowing short and lending long (BSLL). 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.

Suggested Citation

  • Walter E. Block & William Barnett, 2017. "Maturity Mismatching and “Market Failure”," Journal of Business Ethics, Springer, vol. 142(2), pages 313-323, May.
  • Handle: RePEc:kap:jbuset:v:142:y:2017:i:2:d:10.1007_s10551-015-2706-1
    DOI: 10.1007/s10551-015-2706-1
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    References listed on IDEAS

    as
    1. Roger W. Garrison, 1985. "Intertemporal Coordination and the Invisible Hand: an Austrian Perspective on the Keynesian Vision," History of Political Economy, Duke University Press, vol. 17(2), pages 309-321, Summer.
    2. William Barnett & Walter Block, 2011. "Rejoinder to Bagus and Howden on Borrowing Short and Lending Long," Journal of Business Ethics, Springer, vol. 100(2), pages 229-238, May.
    3. Boettke, Peter J. & Coyne, Christopher J., 2005. "Methodological individualism, spontaneous order and the research program of the Workshop in Political Theory and Policy Analysis," Journal of Economic Behavior & Organization, Elsevier, vol. 57(2), pages 145-158, June.
    4. William N. Butos & Roger G. Koppl, 1995. "The Varieties of Subjectivism: Keynes and Hayek on Expectations," Method and Hist of Econ Thought 9505001, University Library of Munich, Germany, revised 17 May 1995.
    5. Philipp Bagus & David Howden, 2009. "The Legitimacy of Loan Maturity Mismatching: A Risky, but not Fraudulent, Undertaking," Journal of Business Ethics, Springer, vol. 90(3), pages 399-406, December.
    6. Fred S. McChesney, 1991. "Antitrust and Regulation: Chicago's Contradictory Views," Cato Journal, Cato Journal, Cato Institute, vol. 10(3), pages 775-798, Winter.
    7. Philipp Bagus, 2008. "Monetary policy as bad medicine: The volatile relationship between business cycles and asset prices," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 21(4), pages 283-300, December.
    8. Nicolás Cachanosky, 2011. "A Comment on Barnett and Block on Time Deposit and Bagus and Howden on Loan Maturity Mismatching," Journal of Business Ethics, Springer, vol. 104(2), pages 219-221, December.
    9. Philipp Bagus & David Howden, 2012. "The Continuing Continuum Problem of Deposits and Loans," Journal of Business Ethics, Springer, vol. 106(3), pages 295-300, March.
    10. Block, Walter & Garschina, Kenneth M, 1996. "Hayek, Business Cycles and Fractional Reserve Banking: Continuing the De-homogenization Process," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 9(1), pages 77-94.
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    More about this item

    Keywords

    Borrow; Lend; Deposit; Maturity mismatching; Fractional reserve banking; ABC; Banking ethics;

    JEL classification:

    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • E59 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Other
    • P16 - Economic Systems - - Capitalist Systems - - - Political Economy of Capitalism

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