A somewhat redundant title, I know.
Here, in the post on George Selgin and banknotes vs. warehouse receipts.
So I would think, if you observed bank run activity (which everyone on all sides of this debate acknowledges is a risk in a fractional reserve system), you would be more inclined to believe that people understood factional reserve banking, rather than less.
If the populace generally thinks that all of their deposits are being kept in reserves, they would have considerably less incentive to run on the bank.
The only reason why you would have a bank run is if your depositors were well aware of the fact that only a fraction of their deposits were actually kept in reserve. Unless you want to argue that every couple of years the population cycles through amnesia and then sudden bursts of clarity and insight.
You can point to bank runs and maybe argue for depositor ignorance of bank solvency, but you can't really argue for depositor ignorance of the fractional reserve system.
Comparative advantage: a partial truth
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