When evolution fails: the Free Banking edition

These days, much of the free banking debate focuses on the history of banking. On one side are the free banking advocates who point to the vastly increased macroeconomic stability that occurred in free banking systems. On the other are the free banking haters, such as Lord Keynes from the blog Social Democracy for the 21st Century, who argue that these periods reveal no such thing. Either the economies in question were far from stable, Lord Keynes says, or their banking systems were nothing like free banking. What’s clear from the diametrically opposed viewpoints is that biased readings of history will not help us decide whether free banking is an improvement or a deterioration on our current monetary system.

What matters, instead, is the theory underlying the idea. For this reason I went to the source itself — George Selgin’s The Theory of Free Banking: Money Supply Under Competitive Note Issue.

A conversation with Miles Kimball

Two weeks ago, I had the pleasure of speaking with Miles Kimball. For those unversed in the who’s who of the economics world, Miles is a Professor of Economics and Survey Research at the University of Michigan and blogs at Confessions of a Supply-Side Liberal and Quartz. As one of the few professional economists who believe our monetary system is in dire need of an overhaul, he has developed a proposal for removing the Zero Lower Bound (ZLB) without outlawing cash. In a gist, Miles’ proposal would allow the central bank to implement a deposit fee on its cash window, thereby creating a negative rate on physical currency. Miles is also the first person with academic credibility to read my book, and his feedback, delivered over a marathon phone call that lasted nearly three hours, was very positive.