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Jack comments on The Mystery At The Heart of Central Banking - Less Wrong Discussion
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This isn't an area I'm an expert in, but here are some thoughts.
That isn't true. Historically, a central bank generally consisted of a very large deposit of precious metal and currency consisted of promissory notes that could be exchanged for that metal under certain circumstances.
And free banking can have fiat currency too: think Bitcoin.
You can't? I mean, I'm not saying there isn't a debate to be had, but this is basically monetary policy since Keynes, no?. How motivated is your confusion here?
It also seems weird to criticize economists for not being curious about this when what your quoting from Mankiw is basically saying "we don't know ! It's a really good question!". Isn't that exactly the attitude we want from scientists?
One could plausibly make the case for central banking as an infrastructure project with similar justifications as centralized highway construction. Being able to deal in a common currency almost certainly reduces transaction costs.
Finally, I wonder if there is any way that a government that collects taxes doesn't end up acting as a defacto central banker. Like, there is a strong sense in which "fiat currency" is backed since that is how the government collects taxes. No matter the monetary environment there is a tax policy that is essentially equivalent to a monetary policy. In a competitive currency market the government is still going to price assets and take them. And if the government is worried about banks not lending enough they can always just raise taxes on whatever uncredited assets are in the vault. That's a lot more expensive and invasive than a central bank, though.
Fiat money is money that is money because the government said it is money and that it is valuable and, usually, is money that no one else is allowed to compete with. Bitcoin is certainly not fiat money.
It's a complete non-sequitur, even if it is a standard non-sequitur. We'll get to it eventually.
It looks like a lack of curiosity when they casually hold beliefs they can't support with the evidence (Mankiw, if no one else, should oppose central banking because he has stated he has no reason for supporting it) and because economists simply don't talk or ask very much about why they think central banking is a good idea, even though it is so weird and different from the way economists normally do things.
This is just semantics but since we're talking about the semantics of something a real person actually said it would be useful to understand what that person means by the word.
-Gregory Mankiw, "Principles of Economics". Bitcoin has no intrinsic value.
No. Look. It might be wrong. I'm not equipped to fully evaluate the claim. But it isn't a non-sequitur because makes total sense that you might be able to encourage consumption and hiring by increasing the money supply and by increasing the rate of inflation.
Huh? Mankiw clearly has some notions about why it is a good idea even if he doesn't have a fully developed theory. He certainly doesn't appear to have more evidence against the belief than he has for it (which is, you know, the actual Bayesian requirement for disbelief).
The other thing is, Mankiw, and the field of economics in general is in the business of giving concrete and immediate advice to the public. That kind of activity tends to involve working within the status quo along plausible lines of reform. Most economists are focused on narrow areas of policy not trying to rethink the global economy from the ground up (though, of course there are those that do which is why the idea of free banking is in no way a new idea). Dismantling central social institutions, with the destablization that entails, is going to have to clear a higher bar of evidence before it gets seriously discussed.
You're just going to end up playing reference class tennis with this point. The extent to which it is "so weird and different" is clearly disputable.