Hayek (1976, 1978, 1984, 1990) is often credited with the resurgence of interest in alternative monetary systems. His own proposal, however, received sharp criticism from Friedman (1984), Fischer (1986), and others at the outset and never gained much support among academic economists or the wider population. According to Friedman, Hayek erred in believing that the mere admission of competing private currencies will spontaneously generate a more stable monetary system. In Friedman’s view, network effects, to use the modern term, discourage an alternative system from emerging in general and prevent Hayek’s system from functioning as desired in particular. I offer new evidence provided by recent events in Somalia as support for Friedman’s initial doubts.As some of you will no doubt recognize, this builds on my earlier work with Larry White.
Wednesday, May 04, 2011
What I've Been Writing
In my latest working paper, I consider the debate between Friedman and Hayek in the 1970s and 1980s following the publication of Hayek's Denationalisation of Money. Here's the abstract: