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In Defence of ‘Demand’ Deposits: Contractual Solutions to the Barnett and Block, and Bagus and Howden Debate

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  • Anthony Evans

Abstract

This article contributes to a recent debate between Barnett and Block (J Bus Ethics 88(4): 711–716, 2009 ), Bagus and Howden (J Bus Ethics 90(3): 399–406, 2009 ), Barnett and Block (J Bus Ethics 100: 299–238, 2011 ), Cachanosky (J Bus Ethics 104: 219–221, 2011 ) and Bagus and Howden (J Bus Ethics 106: 295–300, 2012a ) regarding the conceptual distinction between demand deposits and time deposits. It is argued that from an economic perspective there is nothing inherently fraudulent or illegitimate about deposit accounts that are available ‘on demand’, but that this relies on certain contractual provisions. Particular attention is drawn to option clauses and withdrawal clauses, which “solve” the problems raised by Barnett and Block, and Bagus and Howden. Previous authors have also neglected the asset side of banks balance sheets, and this is shown to further justify the legitimacy of fractional reserve banking. Copyright Springer Science+Business Media Dordrecht 2014

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  • Anthony Evans, 2014. "In Defence of ‘Demand’ Deposits: Contractual Solutions to the Barnett and Block, and Bagus and Howden Debate," Journal of Business Ethics, Springer, vol. 124(2), pages 351-364, October.
    • Handle: RePEc:kap:jbuset:v:124:y:2014:i:2:p:351-364
    DOI: 10.1007/s10551-013-1867-z
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    References listed on IDEAS

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    1. Kevin Dowd, 1991. "Option Clauses and Bank Suspension," Cato Journal, Cato Journal, Cato Institute, vol. 10(3), pages 761-773, Winter.
    2. Anthony Evans & Steven Horwitz, 2012. "On not doing due diligence: Bagus and Howden on free banking," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 25(2), pages 149-157, June.
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    Cited by:

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    2. Philipp Bagus & Amadeus Gabriel & David Howden, 2016. "Reassessing the Ethicality of Some Common Financial Practices," Journal of Business Ethics, Springer, vol. 136(3), pages 471-480, July.

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