Kurt Schuler

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Kurt Schuler is an economist in the Office of International Affairs at the U.S. Treasury Department. In his spare time he edits Historical Financial Statistics (a free, noncommercial online data set) for the Center for Financial Stability. He has written a number of publications about the history of free banking and about other monetary systems. Because the Treasury Department discourages employees from commenting publicly on current policy issues within its purview, he refrains from discussing such issues here. His views represent no official Treasury Department position. As befits a bureaucrat, he has chosen to remain faceless, hence we have posted no photo of him.

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Leland Yeager, by Robert Greenfield

by Kurt Schuler October 4th, 2014 8:24 am

“I like to think,” Mark Blaug’s Who’s Who in Economics (1986) quotes Yeager as saying, almost reticently it seems, “that I have made contributions toward identifying money’s role in balance-of-payments disequilibrium and  adjustment and reconciling the elasticities, absorption, and monetary approaches to the topic; grasping the implications of the fact that money serves as routine medium of exchange and lacks a market and a price of its own; more fully understanding our existing monetary system by contrasting it with a radically deregulated system [whose unit of account were defined physically but without a link to anything that could come into use as a medium of exchange and] in which media of exchange and payments services were provided by private enterprise; grasping the implications of the fact that money serves as routine medium of exchange and lacks a market and a price of its own and clarifying the nature of capital and interest  and  showing how their proper conceptualization dissolves the ‘Cambridge capital paradoxes’. ”

“I like to think….”?  Would that we all had Yeager’s modesty.  Just for the record, consider….

Apropos “identifying the role of money in balance-of-payments disequilibrium and adjustment and reconciling the elasticities, absorption, and monetary approaches to balance of payments adjustment”:

Paul Einzig, author of more than 50 books on foreign exchange, called Yeager’s International Monetary Relations: History and Theory “a book of outstanding importance…. [T]he best book on foreign exchange that has appeared since the war.”

Apropos “grasping the implications of the fact that money serves as routine medium of exchange and lacks a market and a price of its own”:

Richard Timberlake, eminent historian of U.S. monetary policy, called Yeager’s “Essential Properties of the Medium of Exchange” (Kyklos, February 1968) “one of the twentieth century’s ten most important articles on monetary theory.”

Apropos “contrasting our existing monetary system with a radically deregulated system [whose unit of account were defined physically but without a link to anything that could come into use as a medium of exchange and] in which media of exchange and payments services were provided by private enterprise”:

Milton Friedman called “A Laissez Faire Approach to Monetary Stability” (Journal of Money, Credit, and Banking, August 1983) “absolutely splendid.” (I hope that readers won’t consider my quoting Friedman’s remark self-serving.  I know that thanks to my having a name beginning with “G” and to Yeager’s generosity, I have received as co-author of this particular article more than a fair share of credit.)

Apropos “clarifying the nature of capital and interest and showing how their proper conceptualization dissolves the ‘Cambridge capital paradoxes’”:

The editors of Economic Inquiry called Yeager’s “Toward Understanding Some Paradoxes in Capital Theory” (September 1976) their journal’s article of the year.

And then there is Yeager’s treatise on ethics (Ethics as Social Science, 2001); his collected writings on political economy (Is the Market a Test of Truth and Beauty? 2011); and his translation (1983) of a 1919 book (Ludwig von Mises, Nation, State and Economy) that, had it appeared in English originally, not in German, might well have taken a place alongside Keynes’s Economic Consequences of the Peace (1919).

I could go on, citing additional journal articles (many, on monetary theory, collected in George Selgin, ed., The Fluttering Veil:  Essays on Monetary Disequilibrium, 1997) and books (e.g., with David Tuerck, Trade Policy and the Price System, 1976).  Instead, I’ll conclude by mentioning a tribute whose very title shows the esteem in which Yeager is held by colleagues and students alike—“The Yeager Mystique: The Polymath as Teacher” (William Breit, Kenneth Elzinga, and Thomas Willett, Eastern Economic Journal, Spring 1996).

Robert Greenfield is Professor of Economics and Finance at Fairleigh Dickinson University


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Leland Yeager, by Jim Dorn

by Kurt Schuler October 4th, 2014 8:20 am

Leland Yeager has been a guiding light in instilling in his students and colleagues the logic of the price system, whether it be in advanced price theory, which he taught at the University of Virginia when I was a Ph.D. student, or international trade. His appreciation for the institutional infrastructure of a market system was clearly seen in his teaching and in his scholarship. His discipline and love of learning is legendary. On this his 90th birthday, we can all be thankful for his many contributions to the economics profession and for his friendship over the years. Happy birthday, Leland!

Jim Dorn is Vice President for Monetary Studies at the Cato Institute


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Leland Yeager, by Kenneth Elzinga

by Kurt Schuler October 4th, 2014 8:17 am

Leland Yeager at 90. My first reaction was: a lifetime of scholarship of the highest order. My second reaction: what a privilege to have been a colleague of Leland’s when he was on the faculty at the University of Virginia—where so much of his exemplary scholarship took place. My third reaction: what an honor to be counted among Leland’s friends.

In everyday language, a “know it all” is a pejorative expression. But in the case of Leland Yeager, the expression “know it all” applies in a positive way. Not that Leland is omniscient; no person is. What struck me and my colleagues about Leland is that he genuinely knows so much—about economics, about languages, about current events, about philosophy—about most everything that an educated person might try to comprehend. Graduate students at the University of Virginia appreciated the fact that Leland took teaching very seriously. Students recognized that if they could “get it all down,” and then digest Leland’s classroom material, they would have a good understanding of any topic Leland was teaching that day. In an academic culture that sometimes places a premium on cleverness, Leland always exhibits a passion for truth and sound thinking. Those of us who know him could not imagine him dissembling. Truth really matters to Leland.

Kenneth Elzinga is Robert C. Taylor Professor of Economics at the University of Virginia


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Leland Yeager, by Warren Coats

by Kurt Schuler October 4th, 2014 8:14 am

Dear Leland,

You were already a legend when I arrived in Charlottesville in 1970 as an assistant professor in the economics department you were then chairing. I quickly learned to come to your office well prepared with the questions I wished to ask and issues I wished to discuss. I also quickly confirmed that your clear and insightful writing was reflective of your analysis in general, which you were always prepared to share. The big surprise was that you were also an excellent cook.

The economics profession and I are grateful beneficiaries of your scholarship.

I am privileged to have been your colleague and friend. As you turn 90 and pass another milestone, I wish you all the best in this next chapter.

Sincerely,

Warren

Warren Coats has worked in many countries, including such hot spots as Afghanistan, Bosnia, Iraq, and South Sudan, as an official of the International Monetary Fund or a consultant on monetary and financial reform


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Leland Yeager, by Roger Koppl

by Kurt Schuler October 4th, 2014 8:10 am

I can recall the first time I saw Leland, though I did not meet him then.  It was September 21st, 1981.  I was a second-year graduate student in NYU’s “Austrian” program.  Along with Don Boudreaux, Sandy Ikeda, George Selgin and the other Austrian students, I was allowed to attend the Mises centenary conference being held at NYU.  We were specifically forbidden to comment, ask questions, or make noise.  We all found it hard to honor this last prohibition when, at a certain point, Leland exclaimed forcefully, “What’s all this about ‘You can’t predict’?  Mises spent his whole life predicting!”   We wanted to cheer.  Later I came to Auburn University to study under Leland.  By the time I came under his influence I had learned some economics at NYU, and much of it was supposed to be “fancy.”  I did not know that economics is not “fancy,” certainly not the core of it.  The best economics is simple, but not simplistic, as Pete Boettke constantly reminds us.  I learned lots of economics from Leland Yeager.  Looking back, though, I think the greatest lesson I learned was the value of fancy-free economics.  The core of the enterprise is price theory, verbal price theory that pays attention to who does what and whether your model makes human sense.  That’s fancy-free economics.  And in the hands of a master like Leland, it is deep and sophisticated economics.  It is what Bruce Caldwell calls “basic economic reasoning,” which he defines as “the sort of reasoning that economists utilize all the time in the classroom.”

Leland also taught me how to pronounce Italian words.  He knew I would soon be getting married in Rome and wanted to help me prepare.  It seemed a dubious skill to properly pronounce words I could not understand.  How would that help me with my Italian in-laws?  I worked on it, though, out of love and respect for my teacher.  Later, I was able to pick up enough Italian to talk to those in-laws. I think Leland realized that if you can discriminate among the sounds, you can pick up the language even without formal training.

I am a poor student.  My economics is still too fancy and I still speak a rather poor and broken Italian.  But if I have made some progress on either front, the credit goes to Leland Yeager.

Roger Koppl is Professor of Finance in the Martin J. Whitman School of Management at Syracuse University and a faculty fellow at SU's Forensic and National Security Sciences Institute


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Leland Yeager, by David Tuerck

by Kurt Schuler October 4th, 2014 8:06 am

Professor Yeager was by far the best teacher I had in my Ph.D. program at Virginia. He also offered me the dream opportunity, as a graduate student, to co-author a book with him, entitled Trade Policy and the Price System (and later, Foreign Trade and U.S. Policy).  I wish him many happy returns.

David Tuerck is Professor of Economics at Suffolk University and Executive Director of the Beacon Hill Institute


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Leland Yeager, by Thomas D. Willett

by Kurt Schuler October 4th, 2014 8:01 am

Leland Yeager is 90. That's hard for me to believe. It seems only a short while ago that I was sitting in his classes in awe of the way that he would take extremely complicated articles and show us their core arguments and key factors on which they depended.

The clarity of mind needed to do that is an all too rare commodity.

By example he taught us what it was like to think clearly and with intellectual honesty. One should learn both sides of any professional dispute. Yeager was no Keynesian but he made sure that we understood the main Keynesian arguments. Indeed I found that I had learned from him better than many of my colleagues from other universities who had studied with Keynesian oriented professors.

Besides teaching us how to do economics, he gave us insights into many economic issues, such as the integration of absorption, elasticity and monetary approaches to the effects of exchange rate adjustments, which are still relevant to current debates.

I have been blessed with being mentored by a number of fine economists in school and beyond. None taught me more about how to be an economist than Leland Yeager.

I owe him more thanks than I can ever adequately express.

Thomas D. Willett is Director of the Claremont Institute for Economic Policy Studies and Horton Professor of Economics at Claremont Graduate University and Claremont McKenna College


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Ronald McKinnon, 1935-2014

by Kurt Schuler October 2nd, 2014 10:08 pm

Ronald McKinnon, William B. Eberle  Professor of Economics at Stanford University, has died from complications of a fall he suffered 12 days ago. I met McKinnon for the first time a month ago after having corresponded with him a few times over the years. He was hard of hearing but otherwise seemingly in good health. He was still full of plans for the future: we talked about financial sanctions, and he mentioned that if he ever got around to a revised edition of his recent book The Unloved Dollar Standard, it would be the topic of the new first chapter.

McKinnon's relation to free banking comes through his book Money and Capital in Economic Development (1973). It and a book by his Stanford colleague Edward S. Shaw, Financial Deepening in Economic Development (also 1973), introduced the ideas of "financial repression" and "financial deepening." Financial repression consists in various kinds of regulatory attempts to direct credit to favored sectors. Exchange controls, interest rate ceilings, compulsory credit allocations, and other measures promulgated to promote financial deepening and economic growth instead usually end up making the financial system and growth more fragile. Larry White, George Selgin, and others have used McKinnon and Shaw's ideas to argue that restrictions on note issue are a kind of financial repression, and that removing them would promote financial deepening.

Another book by McKinnon that influenced me was The Order of Economic Liberalization: Financial Control in the Transition to a Market Economy (1991, second edition 1993),  an in-depth analysis of how the financial systems of former communist countries could best make the transition to a market economy. Although I disagreed with a number of McKinnon's prescriptions, I appreciated the clarity with which he treated the issues and the coherence of his approach. In my own work proposing the currency board system in several former communist countries. some of which adopted the system, I benefited from knowing McKinnon's ideas.

McKinnon had taught at Stanford since 1961, and was a factor in the rise to prominence of its economics department. His Web site is still here for now.


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Free banking in Jersey

by Kurt Schuler September 28th, 2014 1:51 pm

Not New Jersey; old Jersey, in the Channel Islands. I recently read a paper by Brandon Dixon, an undergraduate economics student at the University of Chicago, that examines currency arrangements in the periphery of the United Kingdom. The paper should be issued in a month or two and I will post a link when it is, because the paper also discusses Scotland. One of the sources Dixon cites on the history of currency in Jersey is this summary by its government, which briefly discusses the island's free banking period (see pages 12-14). There were more than 100 note issuers by 1817, and even churches issued notes! Consolidation then set in. Later in the century, I gather in 1873 (the year of a worldwide financial panic), a number of banks failed. A subject for detailed research by somebody who can go and poke around local archives?


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Free banking in Belgium

by Kurt Schuler September 2nd, 2014 9:23 am

That is the new title of a paper I wrote with the Lebanese economist Patrick Mardini. Patrick did the bulk of the work, and he will be presenting the paper at the conference in Lund, Sweden on free banking history later this week (see the previous post). Here is the abstract:

Belgium had a somewhat free banking system from 1835 to 1850. The country had two major banks in Brussels, the Société Générale and the Banque de Belgique; several smaller banks in the provinces; and many private bankers. The system had restrictions on note issue and legal barriers to entry. Belgium suffered from a bank run in 1838 triggered by the threat of war with the Netherlands. The Banque de Belgique had invested its resources in illiquid assets and did not know how or when to reduce its note issue. It was bailed out by the government but knew that another failure would spell its end. This led the bank to reform its activity, deleverage, and hedge the remaining risk. The Société Générale was not seriously threatened in 1838 and continued as before. In 1848, the French revolution of that year and France’s suspension of convertibility induced another crisis. This time it was the turn of the Société Générale to falter, for the same reasons as the Bank de Belgique in 1838. The government intervened through fiat money, suspension of convertibility and permission to monetize liabilities. The free banking system ended with the creation of a central bank on January 2, 1851.


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