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An Opinion of No Redeeming Value

by George Selgin November 11th, 2013 5:54 pm

An "idiot savant" is, according to my Webster's New Collegiate Dictionary, "a mentally defective person who exhibits exceptional skill or brilliance in some limited field." So what's the term for an otherwise intelligent person who exhibits exceptional idiocy in some limited field? Well, I don't know the correct general term, assuming one exists. But for the particular instance I have in mind, "Josh Barro" will do nicely.

In his column for today's Business Insider, Mr. Barro, finding himself miffed by the concurrent decision of Delta Airlines and Hyatt Hotels to reduce the award values of the frequent customer credits he'd been accumulating from them, elects to complain about it.

But it appears that Barro had misgivings about employing the Business Insider's scarce column inches (and, presumably, getting paid for doing so) for what was, after all, mere personal kvetching of the sort best reserved for the poor sap on the next bar stool, and then only after at least one drink too many. So Barro decided that he'd better justify putting his little tirade into print by drawing from it a far-reaching economic lesson concerning...you guessed it: free banking!

Here, in full, is the lesson:

Libertarians often advocate for a system of "free banking" where monetary authority is shifted to private actors, who would theoretically be policed by consumers who demand stable currency values and protection from inflation. But as we can see, America already has a system of private monetary authorities, and they're an inflationary mess.

Airlines and hotel firms lock in loyal customers, only to pull the rug out from under them once they've run up significant asset balances. They cannot resist the urge to print. Can you imagine the disaster if we extended this system to ordinary currency.

Well, there you have it. No need to actually look into the long history of highly-reputable private currency suppliers in Scotland or Canada or the U.S. Suffolk System or a dozen other places. And so what if banks today have for some reason still not figured out that they might treat their customers' deposit credits like so many reward points, to be devalued at whim. ("So, Mr. Barro: you'd like to buy 100 Federal Reserve award dollars? No problem. That will be cost you $200 in deposit credits. What's that? Oh, I'm terribly sorry: didn't you receive our notice regarding the change in our award terms?) And never mind, finally, the actual record of the dollar's "devaluation," in terms either of goods generally or of gold--a record showing that only the Fed, among all past or present U.S. paper currency issuers, has ever managed to permanently devalue its paper with impunity.

Why bother, in short, referring to any facts at all, when all you need is a little analogy, served-up with a great dollop of unmerited self-assurance.

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