Sunday, October 26, 2014

WOW: George Selgin vs. Joseph Salerno

By Robert Wenzel

Joseph Salerno's essay on Larry White's comments on the gold standard (SEE:Larry White’s Baffling Interview on the Gold Standard) has resulted in a back and forth between Mises Institute scholar, Salerno and George Selgin, head of the Cato Institute's a new research center on monetary policy (SEE: Cato Shrugged Opens Center to "Challenge" Fed).

Here's the back and forth which originally appeared in the comments section of

I'll let everyone read for themselves and decide who makes the more powerful points, but I think the answer is obvious.

George Selgin says:

Joe, once again it is all too evident that you are bending over backward to pick a fight. Larry makes an obviously diplomatic remark about a book he obviously has reservations about, stressing only that the history is useful, and you respond that, well, the book has good history but sucks otherwise. Well, you might have made the general interpretation, but since you are playing MI [Mises Institute] attack dog, that won’t do, will it.
Most opponents of fractional reserves don’t favor outlawing it? Well, those who call it fraud–perhaps 90% at a rough guess of the critics I hear from, who these days are mainly inspired to do so by MI sponsored materials, including of course Murray [Rothbard]’s influential work (which is quite explicit on the matter)–presumably don’t think that fraud out to be legal, right? (And claims about FRB being fine if banks will only print their reserve ratios on their notes etc., are just a dodge, since banks can’t avoid random fluctuations in reserves, as every student of the topic knows.)
And what about not mentioning the MI among “think tanks” that pay attention to the gold standard? Obvious swipe at MI? Well, it might be if everyone thought of the Mises Institute as a “think tank,” but, like it or not, most people don’t. Here is the most often cited study ranking world and U.S. think tanks every which way, including a list for one’s specializing in economic policy:
You will search throughout this pub. for the Mises Institute in vain, though you will find plenty of little ones listed here and there. Personally I always thought of MI as an education institute, not a think tank, and that was true long before my association with Cato. People might honestly disagree about how it should be classified–I mean, you aren’t exactly holding Hill briefings, right? (No, that’s not a criticism. Just sayin’.)
Thoughtful readers, and ones who know Larry especially, will apprehend the mean spirited nature of these attacks even on self-identified Austrian economists who aren’t, and who perhaps would rather not be, associated with the Mises Institute. Others of course will be cheer you on. But you won’t be winning any intellectual battles with an army that can only attract such recruits.
Joseph Salerno says:

Thanks for your reply to my post.
1. You are technically correct that the Mises Institute is not a “think tank” in the conventional sense of the term. But neither are many of the 459 “free market organizations” in the Atlas Network, which Larry does mention. In addition, the Mises Institute publishes plenty of policy related material on its website, particularly on monetary policy and some of its associated scholars have testified before Congress on monetary policy
2. On Lewis’s book, Larry could have been just as diplomatic by saying something like “Although I have serious reservations about some parts of Lewis’s book, it contains a valuable history etc.,” but he did not and I am not going to put words in his mouth. Given what he did say. i thought that it was appropriate to point out to people interested in the gold standard who may be influenced by Larry to read Lewis’s book that there are serious problems with it. Why is that “bending over backwards” to pick a fight?
3.. I never made any claim about what proportion of the critics of fractional-reserve banking consider it fraud, although I would venture to guess that the majority of academic economists associated with the Mises Institute do not consider it fraud under any and all circumstances, But that, as I suspect you well know, was not my point. My point was that most “Banking School” free bankers such as yourself and Larry are fixated on the fraud question and shy away from addressing the economic inadequacies of fractional-reserve banking pointed out by “Currency School” free bankers following Mises. In the Currency School view, free banking would lead to the disappearance of the hybrid money creating/lending institution of the commercial bank as we now know it.
4. You assert that: I am an “attack dog”; that my comments on the substance of Larry’s interview are “mean spirited”; and that I wrote my post to garner applause from the “Mises crowd” not in the spirit of truth seeking. I will allow what I wrote to speak for itself. I will be charitable and chalk up your aspersions on my scholarly integrity to your notorious hypersensitivity to criticism, especially when questions are raised about your unique position on the the nature and consequences of fractional-reserve banking–a position that you formulated and spent your your entire career defending.
For the record, although the Mises Institute is not a DC think tank, I find it odd that George Selgin, of all people, would write:
Personally I always thought of MI as an education institute, not a think tank...People might honestly disagree about how it should be classified–I mean, you aren’t exactly holding Hill briefings, right? (No, that’s not a criticism. Just sayin’.)
"Aren't exactly holding Hill briefings"?
Please keep in mind this comment is coming from a person who now heads a research center which according to a recent center press release, is:
Calling the Federal Reserve too powerful and undisciplined,[and] promoting a new [Cato Institute] research center that...will fundamentally challenge the central bank and its monetary policy.
Does he know the history of the current challenges on the Hill to the Fed? Is he not aware of this?

And that the author, Dr. Ron Paul, is closely affiliated with the Mises Institute. In fact, Dr. Paul is speaking at a Mises Institute event in November in Costa Mesa, California

Is Selgin not aware of the latest developments on the Hill?
House Approves Ron Paul’s ‘Audit the Fed’ Bill 
Former Rep. Ron Paul’s push to audit the Federal Reserve got another boost Wednesday when the House passed the bill for the second time in three years, and by a bigger margin than before.
The bill, now sponsored by Rep. Paul Broun, Georgia Republican, was approved on a 333-92 vote, with all but one Republican and 106 Democrats in favor of it. That’s a major jump from last time, when a majority of Democrats voted against it.
I emphasize, once again, Selgin is now running a monetary policy research center designed to influence the Hill about the Fed. Shouldn't he be aware of the current roots of debate about the Fed on the Hill and how it started?

On one point Selgin is correct, the Mises Institute is more of an educational institute than a DC-type think tank. But that is only because the perspective at MI is that education is ultimately what changes views and positions. And there is no better evidence of this than the debate now taking place on the Hill about the Fed.

Indeed, even stronger evidence of the success of the MI approach may be the very fact that Cato has now chosen to follow in the footsteps of Ron Paul, and MI, and focus on the Fed..

From this, a careful observer might conclude that it is true that the Mises Institute  is  not a traditional think tank. But, facts suggests, now that Cato is hopping on the Fed/monetary policy focus bandwagon, that MI is a think tank to think tanks and that, when all is said and done, it is the Mises Institute that sets the trends that more traditional think tanks, like Cato, hurry and attempt to follow.

Robert Wenzel is Editor & Publisher at and at Target Liberty. He is also author of The Fed Flunks: My Speech at the New York Federal Reserve Bank. Follow him on twitter:@wenzeleconomics

1 comment:

  1. I'm disappoint George hasn't whined in the comments yet.