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Money Creation and Distributive Justice
Event Date: November 10, 2016 - 12:00pm to 1:30pm
Location: FSS 5028, 120 University Private
Presented by CIPS, IPEN, and the Political Thought Network
Free. Bilingual presentation. Registration is not required. Seating is limited and available on a first come, first served basis.
Theories of justice appeal to a variety of criteria to determine what social arrangements should be considered just. For most, the distribution of financial resources matters. However, they ignore the way that money creation itself might have an effect on distributive justice.
Professor Dietsch will compare two systems of money creation: first, fractional banking as we know it today, under which commercial banks can create money by giving out loans without any significant constraints other than the creditworthiness of the debtor; second, 100% banking (Fisher, 1936; Benes & Kumhof, 2012) under which banks play a role of mere intermediaries.
The two systems are usually compared with respect to their relative financial stability only but Dietsch extends this analysis to distributive justice. Arguably, fractional banking is biased towards those with collateral (the rich) whereas 100% banking would significantly reduce that bias. Different ways of dealing with credit default also impact distributive justice. Systems that put the entire burden of default on the debtor can have disastrous consequences whereas ones that allow short-cuts for creditors distribute the burden.
Peter Dietsch is a professor in the Département de Philosophie at Université de Montréal. He works on questions of economic ethics, distributive justice, and economic policy. He is the author of Catching Capital: The Ethics of Tax Competition (OUP, 2015) and numerous articles.