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Robert P. Murphy



Articles by Robert P. Murphy

Hayek’s Plan for Private Money

17 days ago

The most famous Austrian economist is 1974 Nobel laureate Friedrich Hayek. Because of his moderate views excusing state interventions in various circumstances, hardcore Rothbardians tend to regard Hayek as less than pure in many areas.
However, one area where Hayek is certainly more radical (though perhaps not correct!) than even Murray Rothbard is monetary institutions, as detailed in his fascinating (1978) pamphlet The Denationalisation of Money.
When it comes to the free market’s handling of money, the typical Austrian argument is over fractional reserve banking (FRB). Some think FRB is perfectly legitimate (so long as the banks do not receive special privileges from the government), while others consider it inherently fraudulent. But both groups agree that

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A Review of Stephanie Kelton’s The Deficit Myth

June 30, 2020

The good news is that Stephanie Kelton has written a book on MMT that is very readable and will strike many readers as persuasive and clever. The bad news is that Stephanie Kelton has written a book on MMT that is very readable and will strike many readers as persuasive and clever.

Narrated by the author.
Original Article: “A Review of Stephanie Kelton’s The Deficit Myth“.

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Some Conservatives Want Americans to Abandon Classical Liberalism. Don’t Listen to Them.
Donald Trump’s economic populism, and his break with the established post-war conservative movement, has created an opening for new types of conservatism. Among these is the anti-market wing of the movement characterized by a

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The Deficit Myth: Modern Monetary Theory and the Birth of the People’s Economy

June 27, 2020

[Review of Stephanie Kelton, The Deficit Myth: Modern Monetary Theory and the Birth of the People’s Economy (New York: PublicAffairs, 2020).]
I’ve got good news and bad news. The good news is that Stephanie Kelton—economics professor at Stony Brook and advisor to the 2016 Bernie Sanders campaign—has written a book on modern monetary theory (MMT) that is very readable and will strike many readers as persuasive and clever. The bad news is that Stephanie Kelton has written a book on MMT that is very readable and will strike many readers as persuasive and clever.
To illustrate the flavor of the book, we can review Kelton’s reminiscences of serving as chief economist for the Democratic staff on the US Senate Budget Committee. When she was first selected, journalists

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Keynesians on the Cause of, and Cure for, Depressions

June 17, 2020

[This article is part of the Understanding Money Mechanics series, by Robert P. Murphy. The series will be published as a book in late 2020.]
In chapter 8 we presented Ludwig von Mises’s explanation of how bank credit expansion causes the boom-bust cycle, what is now known as Austrian business cycle theory. However, the reigning view today in both academia and the popular media is the Keynesian explanation, derived from John Maynard Keynes’s famous 1936 book The General Theory.
In contrast to the Austrians, Keynes viewed depressions as something that could naturally plague market economies when total spending (“aggregate demand”) was insufficient to support full employment. Keynes argued that markets didn’t possess a self-correcting mechanism and that left to

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Central Bankers Gone Wild: It’s a New Era at the Fed

June 8, 2020

Editor’s Note: We keep hearing from the Fed’s defenders that the current spate of new stimulus and bailouts from the central bank are really not a big deal and are all very prudent and moderate. I asked Senior Fellow Bob Murphy to provide some much needed perspective.
Ryan McMaken: We’re in a very odd situation right now in terms of evaluating the state of the economy. We can see that there is rising unemployment, and there is likely to be a wave of missed mortgage and rent payments. Is this all just due to the government-mandated “shutdowns” or are there deeper economic issues here?
Robert P. Murphy: In economics there are no controlled experiments, so partisans on a policy dispute can both continue to claim that the evidence is on their side. That’s why

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The Chicago School versus the Austrian School

May 26, 2020

Listen to the Audio Mises Wire version of this article.
People often ask me, “How are the Austrians different from the Chicago School economists? Aren’t you all free market guys who oppose big-government Keynesians?”
In the present article I’ll outline some of the main differences. Although it’s true that Austrians agree with Chicago economists on many policy issues, nevertheless their approach to economic science can be quite different. It’s important to occasionally explain these differences, if only to rebut the common complaint that Austrian economics is simply a religion serving to justify libertarian policy conclusions.
Before jumping in, let me give a few obvious disclaimers: I do not speak for all Austrian economists, and in this article I will be

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Ludwig von Mises & “Circulation Credit” Theory of the Trade Cycle

May 15, 2020

[This article is part of the Understanding Money Mechanics series, by Robert P. Murphy. The series will be published as a book in late 2020.]
Starting with Carl Menger’s undisputed role in the “marginal revolution,” which ushered in subjective value theory, the Austrian school has made important contributions that have been absorbed into standard economic theory. However, the Austrian theory of the business cycle is still something unique to the school, differing not only from the Keynesian (see Chapter 14) but also the market monetarist (see chapter 15) explanations.
Indeed, if someone asks, “Why study Austrian economics?,” the present author answers that only the Austrian approach—with its emphasis on the economy’s intricate capital structure and an appreciation

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Why the Current Unemployment Is Worse Than the Great Depression

May 1, 2020

Government restrictions on production are driving prices up as unemployment drives them down. It’s impossible to say now whether price inflation or price deflation will be the predominant factor in the crisis’s next phase.

This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Millian Quinteros.
Original Article: “Why the Current Unemployment Is Worse Than the Great Depression “

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What Is Entrepreneurship?
We shall concentrate on the capitalist-entrepreneurs, economically the more important type of entrepreneur. These are the men who invest in "capital" (land and/or capital goods) used in the productive process….

Danish State Plans to Pay

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Oren Cass and the Conservative Critique of Pure Laissez-Faire

March 31, 2020

Oren Cass is the executive director of American Compass (AmericanCompass.org), a conservative think tank that stresses the importance of family and domestic industry, in opposition to a singleminded devotion to economic efficiency. Cass was previously a senior fellow at the Manhattan Institute for Policy Research, and was the domestic policy director for Mitt Romney’s 2012 presidential campaign. Bob and Oren have a friendly discussion about their disagreements on economic policy.

For more information, see BobMurphyShow.com. The Bob Murphy Show is also available on iTunes, Stitcher, Spotify, and via RSS.

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In Spain You Can’t Use Your Own Back Yard. Police Make Sure of It.
The last

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The Fed’s Massive Injection of “Liquidity” Also Benefits Uncle Sam

March 16, 2020

There’s a lot to be said regarding the Fed’s surprise announcements—including its Sunday surprise of $700 billion in renewed QE and the complete elimination of all reserve requirements for banks—but here let me just focus on one element: the tendency for Fed officials and all the pundits to treat injections of “liquidity” as if they don’t count as much when distorting the economy. I’ve seen some analysts literally call the Fed’s repo operations “free” as opposed to fiscal policy, which they agree actually costs something.
These distinctions are phony. The Fed’s $1.5 trillion was a “handout” in the same way that a Pentagon fighter jet contract is a handout to a defense contractor. However, the defenders of the Fed are correct that financial institutions per se

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The “Market Monetarists” and NGDP Targeting

March 11, 2020

[This article is part of the Understanding Money Mechanics series, by Robert P. Murphy. The series will be published as a book in late 2020.]
In addition to the Keynesian perspective (covered in chapter 14), a relatively new challenge to the Austrian framework comes from the “market monetarists” and their endorsement of a central bank policy of “level targeting” of nominal gross domestic product (sometimes abbreviated as NGDPLT1). Although not as widespread as the Keynesian paradigm, market monetarism is arguably a more serious competitor to the Austrian school when it comes to monetary theory and business cycle analysis, because many of the leaders of the new approach are self-described libertarians with positions at free market organizations.
The most obvious

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Central Banking since the 2008 Financial Crisis

February 27, 2020

This article is part of the Understanding Money Mechanics series, by Robert P. Murphy. The series will be published as a book in late 2020.
In chapter 5 we reviewed the textbook analysis of how a central bank buys government debt in “open market operations” to add reserves to the banking system, with which commercial banks can then advance loans to their own customers. However, in the wake of the financial crisis of 2008, the Federal Reserve and other central banks around the world adopted new “tools” (the term often used) to influence economic activity.
In this chapter we will first elaborate on conventional monetary policy, and then explain why it had apparently “lost traction” after the fall of 2008. We will then summarize some of the major changes to the

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Why Progressives Are Anti-Vaxxers When It Comes to the Alt Right

February 9, 2020

Bob Murphy first explains a standard progressive viewpoint when it comes to dealing with issues like virus outbreaks, underage drinking, and prostitution. Yet, when it comes to dealing with people whose views they abhor, the progressives suddenly are “zero tolerance” and ignore the mechanisms they point to for the other issues.

For more information, see BobMurphyShow.com. The Bob Murphy Show is also available on iTunes, Stitcher, Spotify, and via RSS.

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The History and Structure of the Federal Reserve System

January 16, 2020

[This article is part of the Understanding Money Mechanics series, by Robert P. Murphy. The series will be published as a book in late 2020.]
This chapter will provide a brief sketch of the historical context in which the Federal Reserve was founded, summarize some of the major changes to the Fed’s institutional structure and mandate over the years, and end with a snapshot of the Fed’s current governing structure. (Chapters 2 and 3 of this book cover more of the historical context, while chapters 5 and 7 explain the mechanics of Federal Reserve operations in much greater detail.)
Historical Context
After a bitter power struggle,1 President Andrew Jackson achieved his goal of “killing” the Second Bank of the United States when its charter expired in 1836. The year

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