Thread by @GeorgeSelgin

The claim that no currency can thrive w/out taxes being levied in it strikes me as one that can be entertained only for as long as it takes to think about it. In fact, the difference between "public receivability" and "Walmart receivability" is more of degree than in kind.

https://twitter.com/MaxJerneck/status/1345735914266488837

Not that I say "more of degree." Of course, the gov't differs from Walmart in being able to compel people to make payments to it. But it doesn't follow that whatever media it receives for such payments will become "money," or that media it refuses cannot be money.

Pls. read "Note" for "Not."

Imagine a country using "pesos" with a 5% income tax rate in which people also spend 5% of their income at Walmart. Walmart announces that henceforth it will accept payment in "lira" instead. Others, including the gov't, continue to request payment in pesos. What happens?

Best guess: people trade pesos for marks just to the extent they need to do so to shop at Walmart, just as if they were doing some shopping overseas.

Well, if the government instead chose to be paid in liras, they could do precisely the same thing when it came to paying their taxes. No biggie! In both cases, the choice hinges on the fact that pesos are still _generally_ preferred to liras. So there's no wholesale switchover.

Of course, the greater the share of payments to government, the more likely its insistence on receiving a different currency will provoke others to switch. But that goes for Walmart also.

So let's just ditch the silly belief that things can serve as money only by virtue of the fact that governments accept them in payments. Governments may be big players; but they are generally far from being the only players that matter.