Maturity Mismatching and “Market Failure”

Walter E. Block () and William Barnett ()
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Walter E. Block: Loyola University New Orleans
William Barnett: Loyola University New Orleans

Journal of Business Ethics, 2017, vol. 142, issue 2, No 12, 313-323

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.

Keywords: Borrow; Lend; Deposit; Maturity mismatching; Fractional reserve banking; ABC; Banking ethics (search for similar items in EconPapers)
JEL-codes: E2 E59 P16 (search for similar items in EconPapers)
Date: 2017
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DOI: 10.1007/s10551-015-2706-1

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