The Central Bank Shift to Market Maker of Last Resort: The Unintended Consequences of Unconventional Monetary Policies

We analyze the transition of central banks from lenders to market makers of last resort. The adoption of unconventional monetary policies characterizes this transition. In their new role as market makers, central banks engage in the latter by extending and reinforcing interventions in other markets than the traditional bank reserves market. We then explain that the difference between the two roles is one of degree rather than kind. In both cases, the prevention of liquidity shortages is a primary concern. As conventional policies become inadequate, central banks resort to unconventional policies to escape a general liquidity shortage at the zero lower bound. However, these unconventional policies do not solve the structural problems in financial and real markets. Both conventional and unconventional monetary policies cause price distortions, in particular on asset markets. The policies of the market maker of last resort prevent necessary readjustments of cyclical divergences between real and financial markets.

Israel Kirzner’s Presence in the History of Economic Thought: A Review of His Professional Engagement in Honor of His 91 Years

This paper analyzes the presence of Israel Kirzner in the History of Economic Thought and focusing on his professional engagement with other economists. His academic trajectory is contextualized on three milestones of the recent history of the Austrian School. The first one is the ending of the socialist economic calculation debate, when the Austrian was considered unconvincing due to the economics’ shift to a general equilibrium model of the economy; in the aftermath of the debate, Kirzner entered at the New York University’s PhD program and was mentored by Ludwig von Mises. At this point, Kirzner started to develop his ideas on entrepreneurship and to aim an audience wider than his Austrian peers. The second is the Austrian Revival in the 1970s, in which the prestigious recovery stage of the Austrian School, thanks to Kirzner assuming a leadership role in the process. The third is in the 1980s, when a more consolidated Austrian School attempts to define itself, as Kirzner retains an Austrian vision founded on the synthesis between Mises and Hayek. It is concluded that Kirzner’s professional engagement was fundamental in the recovery of Austrian theory. He communicated Austrian ideas to a wider audience and synthetized Misesian and Hayekian proposals on the market process. These efforts allow us to recognize a Kirznerian view of the Austrian School, established with the traditional microeconomic theory, but including greater subjectivity on the interpretation of economic phenomena, becoming a more general, more realistic theory.

Bioethics, Rent-Seeking, and Death: Examining the Opposition to Kidney Markets

The market for kidneys offers a case study of Baptists and Bootleggers. In almost every country, sales are currently illegal and donated organs are allocated by a central planner. Thousands of people die every year, because of the shortage caused by the absence of markets. This paper starts by examining the free-market alternative, and shows that a market would solve the shortage (and thus unnecessary deaths). It then uses gains-from-trade analysis to explain why current vested interests oppose a move to a market, despite the immense potential for saved lives. In a shift to a market, gains from trade would be distributed away from lucky patients (who receive a zero-price kidney) and various industries that benefit from the shortage (dialysis, medical equipment, etc.); these “Bootleggers” form an alliance with “Baptists” (altruistic donors, large segments of the bioethics community, and organ allocation central planners).

The Neoliberal Turn: Libertarian Justice and Public Policy

In this paper I criticize a growing movement within public policy circles that self-identifies as neoliberal. The issue I take up here is the sense in which the neoliberal label signals a turn away from libertarian political philosophy. The are many import ant figures in this movement, but my focus here will be on Will Wilkinson of the Niskanen Center, not least because he has most prolifically written against libertarian political philosophy. Neoliberals oppose the idea that the rights that libertarianism claims people have are useful guides for making the world a freer place because they forestall too much governmental/democratic political action that they purport to be necessary for increasing freedom. Wilkinson mistakenly takes libertarianism to be a set of ideal public policies for achieving a perfectly free society. If it were, he would be right to turn away from it. But placing rights to freedom at the center of their theory of justice does not commit libertarians to an all-or-nothing approach to political change. Consequences and strategy matter – particularly in a non-ideal world – without abandoning the idea that each individual has a right to freedom. In mistaking libertarian moral claims as a set of policy prescriptions, Wilkinson complains that idealistic policy prescriptions not only fail to take account of how those who disagree will respond to such policies if implemented, but also thereby undermines the justice of those policies in the first instance. Wilkinson proposes that change in the direction of freedom must go through the proper channels of actually-existing democratic legitimacy. It as this stage that Wilkinson’s project comes into direct conflict with libertarianism. Whilst libertarianism is not committed to any particular method of creating a free society under non-ideal conditions, and therefore does not rule out democratic political activism as one among many means of doing that, it cannot be committed to the permanence of democratic political authority, and this is what Wilkinson’s neoliberalism demands above all else. It turns out that Foucault’s characterization of neoliberalism long ago is still accurate to Wilkinson’s own view: that neoliberalism is not about creating a society of free individuals, it is about designing the state apparatus in ways that are inspired by the workings of free society – it is about legitimizing the chains, not breaking them. Neoliberalism is not a pragmatic alternative to libertarianism, but rather a gross misapplication of it.

Two Dogmas of Egalitarianism

It is more than clear that in our previous works—Norms of Liberty and The Perfectionist Turn—we are opposing what is generally understood as egalitarianism in political philosophy. Our purpose here is to clarify our opposition by showing that our rejection of egalitarianism cannot be successfully accused of being inconsistent with morality itself. We believe that discussing what we call “two dogmas of egalitarianism” will go some distance in accomplishing that end. These “dogmas” can be stated as follows: (1) The burden of proof for any deviation from equality in ethics rests upon the advocate of inequality; and (2) One's position on the natural equality (or inequality) of human beings requires a similar position in one’s ethical conclusions.

On the Pragmatic Turn in Political Philosophy

Imagine some policy P about which a scholar said “The best way to help people escape from poverty would be P.” Is this a claim about political philosophy or economics? On the one hand, it seems to be an empirical statement, but there is a normative component as well. Besides the obvious normativity of “best,” there is the tacit implication that poverty is bad and that this is at least some reason to endorse P. But the fact that one can easily imagine either a political philosopher or an economist making the claim points to one reason for the recent growth of programs in Philosophy, Politics, and Economics (PPE), programs of study which emphasize the interdisciplinary connection between political philosophy and the social sciences. Political philosophy is, of course, philosophy, which means it is a combination of analytic and normative tools, but since its subject matter involves human behavior and social institutions, empirical study of those seems like it should be relevant as well. Since political philosophy addresses questions about the social order, findings from the social sciences are surely relevant, chiefly from economics and political science. At first glance this seems directly analogous to the way philosophy of cognitive science would find relevance from work in neurology. But social scientists are themselves often beholden to normative priors which frame their methodology. The increased popularity of and growth of programs in PPE is therefore definitely beneficial both to the philosophers and to the social scientists who explore these issues. However, while the empirical is relevant, and, I would argue, essential, to good work in political philosophy, I would resist the suggestion that the empirical is exhaustive and that the philosophical is either superfluous or unwarranted.

From Intuitions to Anarchism?

When libertarian political philosophy attracted wide public notice in the 1970s, a common view was that the distinctive individual rights advocated in libertarian theory required grounding in a theory of ethics. Recently, this view has come under challenge. It has been argued that resort to such grounding in ethical theory is unneeded. An appeal to common sense intuitions suffices to justify libertarianism. First, a brief account of libertarianism will be presented. Then, some examples of the older, pro-grounding position will be discussed. Then, the principal defense of the newer view, Michael Huemer’s The Problem of Political Authority, will be examined. This discussion constitutes the substance of the present paper. The principal contention of the present article will be that the argument to libertarianism from intuitions does not succeed. In conclusion, it will be suggested that a return to the earlier, grounding view is indicated for philosophers who wish to defend libertarianism.

Social Rules in Libertarian Thought

Libertarianism upholds individual liberty as of primary political importance. The concern for liberty leads to support for highly limited government, and sometimes even anarchism. Sometimes people come under the mistaken impression that libertarians have such a myopic concern for individual liberty that they must oppose social rules and social order. While that is too extreme, libertarianism does seem to have significant tensions with social rules, and the role of social rules within libertarianism is complex and contentious. This work aims to bring out some of this complexity and to clarify the important place of social rules in libertarian thought.

Bastiat as a Social Scientist

This article argues that, notwithstanding views to the contrary, Frédéric Bastiat (Bayonne, 1801; Rome, 1850) was indeed a man of science. Thus, in several of his essays he showed that political economy can attain a level of scientific rigor comparable in many respects to that of the natural sciences. Subscribing to the principle of methodological individualism, he offered some persuasive explanations for why people believe in a multitude of things. After examining science as Bastiat conceived it, we shall look at two important examples, mechanization and rational voting.