DOCSLIB.ORG

Systems, Social Order, and the Global Debt Crisis

Total Page：16

File Type：pdf, Size：1020Kb

Download full-text PDF Read full-text
Systems, Social Order, and the Global Debt Crisis University of Tennessee, Knoxville TRACE: Tennessee Research and Creative Exchange Doctoral Dissertations Graduate School 8-2010 Systems, Social Order, and the Global Debt Crisis John Hamilton Bradford [email protected] Follow this and additional works at: https://trace.tennessee.edu/utk_graddiss Part of the Work, Economy and Organizations Commons Recommended Citation Bradford, John Hamilton, "Systems, Social Order, and the Global Debt Crisis. " PhD diss., University of Tennessee, 2010. https://trace.tennessee.edu/utk_graddiss/778 This Dissertation is brought to you for free and open access by the Graduate School at TRACE: Tennessee Research and Creative Exchange. It has been accepted for inclusion in Doctoral Dissertations by an authorized administrator of TRACE: Tennessee Research and Creative Exchange. For more information, please contact [email protected]. To the Graduate Council: I am submitting herewith a dissertation written by John Hamilton Bradford entitled "Systems, Social Order, and the Global Debt Crisis." I have examined the final electronic copy of this dissertation for form and content and recommend that it be accepted in partial fulfillment of the requirements for the degree of Doctor of Philosophy, with a major in Sociology. Harry F. Dahms, Major Professor We have read this dissertation and recommend its acceptance: Steven P. Dandaneau, R. Scott Frey, Allen Dunn Accepted for the Council: Carolyn R. Hodges Vice Provost and Dean of the Graduate School (Original signatures are on file with official studentecor r ds.) To the Graduate Council: I am submitting herewith a dissertation written by John Hamilton Bradford entitled “Systems, Social Order, and the Global Debt Crisis.” I have examined the final electronic copy of this dissertation for form and content and recommend that it be accepted in partial fulfillment of the requirements for the degree of Doctor of Philosophy with a major in Sociology. Harry F. Dahms, Major Professor We have read this dissertation and recommend its acceptance: R. Scott Frey Steven P. Dandaneau Allen Dunn Accepted for the Council: Carolyn R. Hodges Vice Provost and Dean of the Graduate School (Original signatures are on file with official student records.) SYSTEMS, SOCIAL ORDER, AND THE GLOBAL DEBT CRISIS A Dissertation Presented for the Doctor of Philosophy Degree The University of Tennessee, Knoxville John Hamilton Bradford August 2010 ACKNOWLEDGEMENTS I‟d like to thank Dr. Harry F. Dahms for his support, guidance, and encouragement on this project. He has exhibited open-ended patience, enabling me to conduct research without prejudging its direction and/or conclusions. I‟d also like to thank the committee members, Dr. Steven Dandaneau, Dr. R. Scott Frey, and Dr. Allen Dunn, each of whom made vital suggestions for the final draft of this dissertation. In particular, Steve Dandaneau‟s frank and direct line of questioning elicited for the first time a summary statement of what caused the global debt crisis. Scott Frey reminded me of the centrality of the natural environment in explanations of social phenomena. Allen Dunn provided invaluable editing advice as well as thought-provoking commentary pertaining to the relationships between Luhmann, Habermas, and systems theory. Finally, I‟d like to thank those professors who were originally on my committee but had to withdraw due to unexpected medical, family, and professional reasons. Dr. Robert Gorman, Dr. Stephanie Bohon, and Dr. Robert Jones have provided professional and personal guidance and support throughout my tenure as a graduate student at the University of Tennessee. ii ABSTRACT Part I examines the global rise of both public and private debt and its recent manifestations in the US housing bubble and the financial panic of 2007-8. A review of the most popular theories of the debt crisis is provided, including an explication of securitized banking and economic theory. The underlying condition of increasing ecological and energetic scarcity is accorded central significance in the broad trajectory of world growth and debt, Part II explicates systems theories of social order and the social significance of markets. The theories of Niklas Luhmann, Talcott Parsons, Mario Bunge, Anthony Giddens, and Jürgen Habermas are evaluated with respect to their theories of social order and crisis. A central finding is that, although declining rates of exergy production inhibit the global economic recovery as measured by conventional economic tools, this fact is not likely to be widely recognized. A central theme of Part II is how social systems handle uncertainty, risk, and to what extent complex social systems can be regulated normatively by the public sphere. As global society becomes increasingly interconnected and dependent upon the depletion of material and energy resources, the communication channels that facilitate the self-understanding of modern society at the same time proliferate, becoming increasingly disconnected and self-referential. Luhmann‟s systems theory is used to explain why collective recognition and action is at once rendered more necessary and increasingly unlikely given the complexity of global society that Earth‟s terrestrial stock of nonrenewable energy resources has engendered. iii TABLE OF CONTENTS Chapter Page INTRODUCTION ........................................................................................................... 1 Explaining the Global Debt Crisis................................................................................ 1 PART I. THE GLOBAL DEBT CRISIS ..................................................................... 6 I. THE HOUSING BUBBLE, FINANCE, AND THE RISE OF DEBT .......................... 7 1. The US Housing Bubble ...................................................................................... 7 The Boom: 1997-2005 ............................................................................................ 7 The Bust: 2006-2008 ............................................................................................ 12 2. Debt and the Rise of Finance ............................................................................. 15 3. The Global Debt Crisis ...................................................................................... 23 II. A FAILURE OF POLITICS OR ECONOMICS? ..................................................... 30 A failure of politics? .................................................................................................. 30 Fannie Mae, Freddie Mac, Ginnie Mae .................................................................. 30 Community Reinvestment Act ............................................................................... 31 Ratings Agencies and the Basel Accords................................................................ 31 A failure of economics? ............................................................................................. 32 The Repeal of Glass-Steagall ................................................................................. 33 Credit Default Swaps and the Commodity Futures Modernization Act of 2000 ...... 34 Conclusions ........................................................................................................... 36 III. THE SYSTEM OF BANKING AND FINANCE ............................................... 37 A Primer on Banking ................................................................................................. 37 Interest rates and the time value of money ................................................................. 38 Leverage: another word for Debt .............................................................................. 39 US Banking Prior to Federal Deposit Insurance ......................................................... 42 The Originate and Distribute Model of Banking ........................................................ 43 The ODM revised ...................................................................................................... 44 Securitized Banking, or, the "Shadow Banking System" ............................................ 46 Repos and short term borrowing ................................................................................ 47 Haircuts and Rehypothecation ................................................................................... 48 Reinforcing Feedback loops: How Loss Spirals Happen ........................................... 52 Financial Panic: perceived counterparty risk and the repo markets ................................ 55 The LIBOR, LIBOR-OIS, and LIBOR-Repo spreads ................................................. 56 Comments ................................................................................................................. 57 Central Banks and Fiat Currency ................................................................................... 60 International Banking and the Bretton Woods Regime ............................................... 63 The Federal Reserve in the current crisis ................................................................... 64 Comments ................................................................................................................. 66 Conclusions ............................................................................................................... 66 IV. MAINSTREAM ECONOMIC THEORIES AND EXPLANATIONS OF THE CRISIS .......................................................................................................................... 67
Load more

Recommended publications
  • The Rationale of Central Banking
    THE RATIONALE OF CENTRAL BANKING A Liberty Press Edition Vera C. Smith THE RATIONALE OF CENTRAL BANKING and the Free Banking Alternative PREFACE BY LELAND B. YEAGER r . ,'7/ Liberty Fund Indianapolis LibertyPress is a publishing imprint of Liberty Fund, Inc., a foundation established to encourage study of the ideal of a society of free and responsible individuals. The cuneiform inscription that serves as our logo and as the design motif for our endpapers is the earliest-known written appearance of the word °freedom" (amagiJ, or "liberty _It is taken from a clay document written about 2300 B (. in the Sumerian city-state of Lagash Reprinted by permission of A. Wilson-Smith. Prelate ©1990 by Leland B Yeager All rights reserved.All inquirms should be addressed to Liberty Fund, lnc, 8335 Allison Pointe Trail, Suite 300, Indianapolis, IN 46250-1687. This book was manufactured in the United States of America. Library of Congress Cataloging-in-Publication Data Smith, Vera C., 1912-1976 [Rationale of central banking] The rationale of central banking and the free banking alternative Vera C. Smith; preface by Leland B. Yeager p. cm. Reprint. Originally published" The rationale of central banking. Westminster, England: P.S King & Son Ltd., 1936 Includes bibliographical references 1. Banks and banking, Central 2. Banks and banking, Central-- Europe--History 3. Banks and banking, Central--United States-- History. HG1811.$5 1990 332.1' 1'094--dc20 90-30937 CIP ISBN 0-86597-086-6 ISBN 0-86597-087-4 (pbk) 1098765432 Contents Preface by Leland B. Yeager xiii Publisher's Note xxvii Foreword by Vera C.
    [Show full text]
  • Free Banking in America: Disaster Or Success?
    Free Banking in America: Disaster or Success? Chris Surro December 17, 2015 Even among the strongest proponents of free markets, there is widespread agreement that there is a role for government in money. We can trust the invisible hand to organize pin factories, but not to issue currency. And in a world where central banks have come to dominate around the world, it becomes hard to imagine any system other than a government monopoly on money. But that wasn't always the case. History has seen many examples where banks freely competed, generating bank notes at their own discretion, usually backed by a commodity but not by a government. In the last thirty years, even as monetary systems have largely converged to centralization, there has been a resurgence in research surrounding alternative arrangements. Economic history has a large role to play in this resurgence. Studying past examples of banking systems, analyzing their strengths and weaknesses, could help us understand and improve modern banking institutions. The American \free banking era," which lasted from roughly 1836-1862, is one ex- ample of a monetary system that has generated substantial research and debate. Before 1836, banks in the United States required a charter from the state they were located in, giving them permission to issue currency. However, starting with Michigan in 1836, many states began to enact laws allowing free entry of banks and by 1860, the number of free banking states had grown to eighteen. Traditional accounts paint a picture of the free banking era as a period of monetary chaos. Lack of regulation allowed \Wildcat banks" to issue more currency than could ever hope to be redeemed, making banking panics frequent.
    [Show full text]
  • February 2016 CURRICULUM VITAE
    February 2016 CURRICULUM VITAE CHARLES W. CALOMIRIS ADDRESS: Division of Finance and Economics Columbia Business School, Columbia University 3022 Broadway, 601 Uris Hall New York, NY 10027 (212) 854-8748 [email protected] EDUCATION: Ph.D., Economics, Stanford University, June 1985. B.A., Economics, Yale University, Magna Cum Laude, May 1979. CURRENT POSITIONS Henry Kaufman Professor of Financial Institutions (March 2003-present; Paul M. Montrone Professor, 1996-2003), Division of Finance and Economics, Columbia Business School, and Professor of International and Public Affairs, Columbia School of International and Public Affairs, 1996-present. Academic Director, Program for Financial Studies, and Director of the PFS Initiative on Finance and Growth in Emerging Markets, July 1-present. Shadow Open Market Committee, April 2009-present. Researcher, Office of Financial Research, U.S. Treasury, July 1, 2014-June 30, 2016. Research Associate, National Bureau of Economic Research, October 1996-present. (Faculty Research Fellow, October 1991-October 1996) Financial Economists Roundtable, November 2007-present. Co-Director, Hoover Institution Program on Regulation and the Rule of Law, January 2014-present, and Distinguished Visiting Fellow, Hoover Institution, January 2015-present. Adjunct Fellow, Manhattan Institute, December 2014-present. PREVIOUS POSITIONS Visiting Scholar, Research Department, International Monetary Fund, May 2013-September 2014. Advisory Scientific Committee, European Systemic Risk Board, European System of Financial Supervision, September 2011-November 2013. Shadow Financial Regulatory Committee, Dec 1997-Dec 2004, Dec 2005-Dec 2012. Houblon-Norman Senior Fellow, Bank of England, January-April 2011. Podlich Distinguished Fellow & Visiting Professor, Claremont-McKenna College, Fall 2010. Academic Director, Jerome Chazen Institute of International Business, Columbia Business School, October 2004-July 2007, and Director, Center for International Business and Education Research, Columbia University, October 2004-July 2007.
    [Show full text]
  • Nine Lives of Neoliberalism
    A Service of Leibniz-Informationszentrum econstor Wirtschaft Leibniz Information Centre Make Your Publications Visible. zbw for Economics Plehwe, Dieter (Ed.); Slobodian, Quinn (Ed.); Mirowski, Philip (Ed.) Book — Published Version Nine Lives of Neoliberalism Provided in Cooperation with: WZB Berlin Social Science Center Suggested Citation: Plehwe, Dieter (Ed.); Slobodian, Quinn (Ed.); Mirowski, Philip (Ed.) (2020) : Nine Lives of Neoliberalism, ISBN 978-1-78873-255-0, Verso, London, New York, NY, https://www.versobooks.com/books/3075-nine-lives-of-neoliberalism This Version is available at: http://hdl.handle.net/10419/215796 Standard-Nutzungsbedingungen: Terms of use: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Documents in EconStor may be saved and copied for your Zwecken und zum Privatgebrauch gespeichert und kopiert werden. personal and scholarly purposes. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle You are not to copy documents for public or commercial Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich purposes, to exhibit the documents publicly, to make them machen, vertreiben oder anderweitig nutzen. publicly available on the internet, or to distribute or otherwise use the documents in public. Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, If the documents have been made available under an Open gelten abweichend von diesen Nutzungsbedingungen die in der dort Content Licence (especially Creative
    [Show full text]
  • Free Banking and the Free Bankers
    Free Banking and the Free Bankers Jijrg Guido Hiilsmann he literature on free banking has expanded dramatically in the last two decades. A young generation of economists Thas regained interest in questions of money, banking, and currency that, for a very long time, had disappeared from broad discussion. This renewed interest was partly sparked by poor results from government regulation of the money supply by cen- tral banks, as well as other legal devices and restrictions. Such failures have undermined the once-common belief that blessings can flow from government monetary meddling. Because free banking was the historical predecessor of and natural alternative to monetary interventions, the theory and practice of free bank- ing has attracted a great deal of interest. It is common for people eager to fight for a specific cause to employ intellectual means unfit to serve their ends. As a result, they may achieve the opposite of their intentions, undermining the ideals and ideas they are seeking to promote. Such is the case with free banking. The case for authentic free banking has been obscured by the strongest defenders of free banking.' In defending views that are not only unrelated to free banking but even fallacious, the free bankers do much harm to their case, inadvertently adding weight to the critique of free banking offered by advocates of central banking and government money. Jorg Guido Hiilsmann is instructor of economics at the Technische Akademie Wuppertal. I wish to thank the referees for extensive comments on this paper. '~evinDowd, David Glasner, Steven Horwitz, A. J. Rolnick, Larry Sechrest, George Selgin, Lawrence White, and Richard Timberlake.
    [Show full text]
  • 1951 Has Become Known As the Era of 'Free-Banking' in Nigeria, Because of the Complete Absence of Laws Go'
    - Journal of Finance And Economic Research Vol. 2, No.1, March 2009 SCOPE AND EFFICACY OF BANKING SECTOR REFORMS IN NIGERIA SINCE THE 1950S: AN APPRAISAL. By Hamilton O. Isu, Ph.D Professor of Banking, Finance and Forecasting Abia State University Uturu. ABSTRACT Over the past six decad.__s, many changes have taken place in Nigeria's banking sector. In fact, many stakeholders believe that our banks lack the capacity and durability to compete in the international banking space, and that the system is increasingly vel}' marginal relative to the potential of the economy. Many banks have shown signs of perennialzmder--capitali::ation, are perennially under-controlled, under• supervised, and under-regulated. Some of the banks were unable to withstand mildfinancial shock" (IS shown in the frequent technical insolvencies pervading their existence and operations. 171ispaper takes incisive excursions into the issues that have necessitated periodic reforms of the banking sector, 'i.:, critical assessments of the reform strategies and results. Keywords: Banks, Financial System, Banking Sector,Capitalization, Systemic Risk, Insolvency. Non-performing Loans, Undercapitalization. 1.0 INTRODUCTION. Banking institutions occupy a central position in the financial system of any economy. Banks, as we know. act as intermediaries for the efficient transfer of resources from surplus to deficit units, through the normal processes of intermediation. One recalls that formal commercial banking activities began in Nigeria iJ:1 189). when the South Africa based African Banking Corporation (ABC) opened a branch in Lagos. TIle opening of (1 branch of Barclays Dank DCO (1-[(y\'; Urjz;.t1 Bank of Nigeria) in Lagos in J 917 was a significant event.
    [Show full text]
  • Pricing Free Bank Notesଝ
    Journal of Monetary Economics 44 (1999) 33}64 Pricing free bank notesଝ Gary Gorton* Department of Finance, The Wharton School, University of Pennsylvania, Suite 2300, Philadelphia, PA 19104, USA and National Bureau of Economic Research, Cambridge, MA 02138, USA Received 4 February 1991; received in revised form 20 June 1995; accepted 5 February 1999 Abstract During the pre-Civil War period, US banks issued distinct private monies, called bank notes. A bank note is a perpetual, risky, non-interest-bearing, debt claim with the right to redeem on demand at par in specie. This paper investigates the pricing of this private money taking into account the enormous changes in technology during the period, namely, the introduction and rapid di!usion of the railroad. A contingent claims pricing model for bank notes is proposed and tested using monthly bank note prices for all banks in North America together with indices of the durations and costs of trips back to issuing banks constructed from pre-Civil War travelers' guides. Evidence is produced that market participants properly priced the risks inherent in these securities, suggesting that wildcat banking was not common because of market discipline. ( 1999 Elsevier Science B.V. All rights reserved. JEL classixcation: G21 Keywords: Bank notes ଝThe comments and suggestions of the Penn Macro Lunch Group, participants at the NBER Meeting on Credit Market Imperfections and Economic Activity, the NBER Meeting on Macroeco- nomic History, and participants at seminars at Ohio State, Yale, London School of Economics and London Business School were greatly appreciated. The research assistance of Sung-ho Ahn, Chip Bayers, Eileen Brenan, Lalit Das, Molly Dooher, Henry Kahwaty, Arvind Krishnamurthy, Charles Chao Lim, Robin Pal, Gary Stein, and Peter Winkelman was greatly appreciated.
    [Show full text]
  • A Comparative Institutional Analysis of Free Banking and Central Bank NGDP Targeting
    CORE Metadata, citation and similar papers at core.ac.uk Provided by Southern Methodist University The Journal of Private Enterprise 29(1), 2013, 25–39 A Comparative Institutional Analysis of Free Banking and Central Bank NGDP Targeting Ryan H. Murphy* Suffolk University Abstract This paper argues that the choice between free banking and central bank NGDP targeting is a difficult to answer empirical question, contrary to the position of those on either side of the debate. Public choice concerns, the lack of the signals of profit and loss, and optimal determination of currency areas are points against any form of central banking. However, free banking may be suboptimal relative to central bank NGDP targeting for three reasons explored here. Until more data become available, it is impossible to gauge the relative importance of one set of these tradeoffs against the other. JEL Codes: E24, E42, D70 Keywords: Free banking; NGDP targeting; Public choice; Comparative institutional analysis I. Introduction As the Great Recession continued, some of the most ardent supporters of the free market began entertaining the possibility that “demand-side” problems were causing persistent unemployment. Although the right-wing press has criticized the untraditional behavior of central banks, monetary policy actually appeared tight by the standard set forth by one of the most eminent and stringent inflation hawks of the 20th century, F.A. Hayek. This standard requires constant total overall spending in the economy (Hayek, 1931; White, 1999). This implies that M*V should be kept at a constant level for money to remain “neutral.” Following the equation of exchange, this is in effect the same as a Nominal Gross Domestic Product (NGDP) target of 0%.
    [Show full text]
  • Do Economists Reach a Conclusion on Free-Banking Episodes?
    Econ Journal Watch, Volume 2, Number 2, August 2005, pp 279-324. DO ECONOMISTS REACH A CONCLUSION? Do Economists Reach a Conclusion on Free-Banking Episodes? IGNACIO BRIONES* AND HUGH ROCKOFF** Abstract, Keywords, JEL Codes WHAT DO WE MEAN BY FREE BANKING IN THIS PAPER WE SURVEY THE LITERATURE ON HISTORICAL episodes of “free banking”—more accurately lightly regulated banking—and distinguish areas in which a consensus has been reached from areas in which more research needs to be done. It is important to recognize at the outset that the term “free banking” as we use it is an historical term. It was applied in the nineteenth century to banking systems that in fact were regulated along many dimensions, and were very far removed from true laissez-faire banking systems. To some extent, as we will show below, it was a fair term to use in the sense that the systems that were referred to as “free banking” were subject to fewer regulations than the systems they replaced. But the term “free banking” was also used at times, we suspect, because the word free, especially * School of Business, Adolfo Ibáñez University. ** Department of Economics, Rutgers University and NBER. The authors gratefully acknowledge Per Hortlund and Anders Ögren and two anonymous referees for providing useful comments and suggestions that improved the paper. All remaining errors are the authors’ own. 279 BRIONES AND ROCKOFF in the early part of the nineteenth century, created a positive aura—the banking version of labeling a frozen island Greenland. There are numerous dimensions on which banking freedom can be measured.
    [Show full text]
  • The Eco-Energetic Point of View
    Munich Personal RePEc Archive The Eco-Energetic Point of View Ternyik, Stephen I. Techno-Logos, Inc. July 2015 Online at https://mpra.ub.uni-muenchen.de/65808/ MPRA Paper No. 65808, posted 29 Jul 2015 13:48 UTC ADVANCING GEORGIST THOUGHT The Eco-Energetic Point of View: Globalistics of Natural Resources, Economic Value and Money Henry George (1839-1897) was the first economist to coin and use the image of spaceship earth, in his groundbreaking work, Progress and Poverty (1879: p.173, NY; reprint by Cosimo, 2005). The quest for the cyclical return of economic depressions, combined with the deep interest in a possible underlying natural law of human progress and decline, is at the heart of his scientific method. It is no coincidence that Francis A. Walker, the first President of the American Economic Association, was a fierce opponent of Henry George as he was also engaged in the research topics of land, economic value creation and money; it is well known that academia is primarily about abstractions of reality, the learning about real life concerns or practices of reality, is viewed as a secondary activity, and even as a disturbance of the discourse to archive knowledge. What historical event chain caused the creation and publication of Progress and Poverty (and the other elaborations of this economic problem by HG, e.g. The Science of Political Economy, 1898)? The scientific study of available post- mortem data sets is pointing to the empirical fact that the panic of 1873 was the first truly great international crisis of the political economic order as similar phenomena (panic patterns) occurred in different global locations simultaneously.
    [Show full text]
  • Safe Banking: Finance and Democracy Adam J
    Safe Banking: Finance and Democracy Adam J. Levitin† Banking is based on two fundamentally irreconcilable functions: safekeeping of deposits and relending of deposits. Safekeeping is meant to be a risk-free func- tion, but using deposits to fund loans inevitably poses risk to deposits, thereby un- dermining the safekeeping function. The expensive, inefficient, and unreliable ap- paratus of bank regulation is an attempt to square the circle between safekeeping and lending: government liquidity and deposit insurance facilities, capital and re- serve requirements, investment restrictions, and supervisory examinations are all aimed at keeping the risks of the lending function in check so as to ensure the safe- ty of deposits. This Article argues for splitting the lending function from the safekeeping function in both traditional- and shadow-banking markets through what it terms “Pure Reserve Banking.” In a Pure Reserve Banking regime, “safe banks” would offer safekeeping and payment services, and nothing else. Loans would be a func- tion solely of capital markets, which would operate without government facilitation of shadow-banking deposit substitutes. Historically, a separation between deposits and lending was not possible, but it is now feasible with today’s deep and efficient capital markets, which already provide the funding for much of the borrowing in the economy. Splitting the lending function from the safekeeping function would protect both the money supply from the market and the market from the money supply. It would enable the government to end its massive support of both formal-banking markets and shadow-banking markets and would thereby remove the moral haz- ard that encourages asset bubbles through overlending.
    [Show full text]
  • Mercantilism, Corporations, and Liberty: the Fallacies of “Lochnerian” Antitrust
    LIBERTARIAN PAPERS VOL. 1, ART. NO. 30 (2009) MERCANTILISM, CORPORATIONS, AND LIBERTY: THE FALLACIES OF “LOCHNERIAN” ANTITRUST JAMES ROLPH EDWARDS* A STRONG ANTITRUST POLICY has long been a cornerstone of progressive belief, and progressive U.S. Presidents such as Teddy Roosevelt actively pursued antitrust prosecutions. In the late 20th and early 21st centuries, however, antitrust law and policy have been increasingly challenged by a resurgent group of libertarian scholars, and after a century of experience with antitrust prosecutions, even many moderates in the economics profession are showing diminished enthusiasm.1 Perhaps sensing a shift in the ideological winds, which often lead a shift in policy, some modern progressives have attempted to rekindle enthusiasm for antitrust. Libertarian Antitrust? In a recent contribution to a symposium devoted to issues surrounding the famous Supreme Court case Lochner v. New York,2 Daniel Crane, a noted professor of law, has made an aggressive effort to convince libertarians to accept antitrust law as not just consistent with, but a legitimate expression of, libertarian principles.3 Crane’s central argument is hinted at early in his paper, when he notes that the kinds of economic power with which the antitrust laws are concerned usually arise due to privileges granted by the state. Few libertarians will disagree with that general point. The specific privileges and immunities Crane thinks to be crucial, however, are in his view bestowed on *James Rolph Edwards ([email protected]) is Professor of Economics at Montana State University-Northern. CITE THIS ARTICLE AS: James Rolph Edwards, “Mercantilism, Corporations, and Liberty: The Fallacies of “Lochnerian” Antitrust,” Libertarian Papers 1, 30 (2009).
    [Show full text]