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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

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

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    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. Murray N. Rothbard, 1997. "The Logic of Action One," Books, Edward Elgar Publishing, number 968.
    6. 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.
    7. Fred S. McChesney, 1991. "Antitrust and Regulation: Chicago's Contradictory Views," Cato Journal, Cato Journal, Cato Institute, vol. 10(3), pages 775-798, Winter.
    8. 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.
    9. 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.
    10. 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.
    11. repec:ucp:bkecon:9780226320625 is not listed on IDEAS
    12. 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.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Borrow; Lend; Deposit; Maturity mismatching; Fractional reserve banking; ABC; Banking ethics;
    All these keywords.

    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 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State

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