Entrepreneurial Error Does Not Equal Market Failure

Philipp Bagus, David Howden and Jesús Huerta de Soto Ballester

MPRA Paper from University Library of Munich, Germany

Abstract: Barnett and Block (forthcoming) claim that Bagus and Howden (2012b) support indirectly the concept of market failure. In this paper we show that maturity mismatching in an unhampered market may imply entrepreneurial error but cannot be considered a market failure. We demonstrate why fractional-reserve banking leads to business cycles even if there is no central bank and why maturity mismatching does not per se lead to clusters of errors in a free market. Finally, we assure that, in contrast to the examples provided by Barnett and Block, maturity mismatching does not imply the creation of two incompatible contracts due to the fungible nature of money.

Keywords: Borrow; lend; deposit; loan; compatible contracts; fungible goods; specific goods; maturity mismatching, fractional-reserve banking, ABCT; banking ethics (search for similar items in EconPapers)
JEL-codes: E2 E59 P16 (search for similar items in EconPapers)
Date: 2018-05-01
New Economics Papers: this item is included in nep-cta and nep-mac
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Citations: View citations in EconPapers (1)

Published in Journal of Business Ethics 149.2(2018): pp. 433-441

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Journal Article: Entrepreneurial Error Does Not Equal Market Failure (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:86706

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