Abstract
ABSTRACT There has been a long‐running debate conducted between two pairs of Austrian School economists concerning the legitimacy of borrowing short to lend long (BSLL). Barnett and Block take the view that the practice amounts to fraud. Their fellow “Austrians,” Bagus and Howden argue that, while risky, the practice is not fraud. Barnett and Block state that BSLL can lead to the Austrian Business Cycle (ABC), in which mal‐investment transforms booms into bubbles, ending in crashes. This inquiry seeks to contribute to the debate, addressing currently neglected issues. These issues involve reconfiguring the debate for consistency between the protagonists' central truth claims, elevating risk‐taking behavior as the crucial determinative factor of market failures, including certain macro‐prudential implications, and concluding that BSLL is not inherently fraudulent. The debate is essentially an ethical one, in which a basic understanding of fraud must be agreed.