Thread by @GeorgeSelgin

Thread: Me and financial laissez faire. To the charges of extolling the virtues of some past "free banking" arrangements (but _not_ the U.S. version!), and urging that others recognize the possibility of market-based monetary order, I plead guilty. But...

I deny being a knee-jerk proponent of monetary or financial laissez faire, and I regret that some of my critics either read me that way, or erect a cardboard-cutout knee-jerk laissez-faire "version" of me, the better to easily knock it down!

My position has long been, not that government intervention in money and related industries is bad per se (like practically all economists, I'm a consequentialist), but that to understand what such intervention really accomplishes one must understand what would happen w/out it.

Economists working in other fields have long taken this approach. A trade economist who has never studies the implications of free trade would be a very badly trained trade economist. It doesn't follow that all competent trade economists must favor completely free trade...

or that those who explore the implications of free trade must be die-hard proponents of free trade.

Before I decided to major in econ., ecology was one of my main interests. Among other things, I learned about how crucial it was to understand the "natural order" of an ecosystem before intervening in it, if potentially serious unintended consequences were to be avoided.

When I jumped into econ., I thought, "O.K.: this is just ecology for human ecosystems." (BTW: I highly recommend Jane Jacob's _The Nature of Economics_, which draws out that comparison.) So I considered the same approach important in assessing intervention in markets.

Hayek's _Denationalisation of Money_ got me thinking that way about gov't interventions in money and financial markets. I thought it strange that so few people had seriously studied the implications of monetary "laissez faire," and that doing so made one a "fringe" thinker.

Given how far the pendulum had swung in favor of government involvement in money, it was natural for me to point to the "nicer" implications of certain departures from the status quo, and particularly those of competition in banknote issuance. Nicer if done right!

(I was, of course, led in that direction in part by having read some chapters of what was then @lawrencehwhite1's dissertation on Scottish banking.) Every serious student of money and banking really ought to read them. You don't even have to pay to do so! iea.org.uk/sites/default/…

Early on, the great and kind Anna Schwartz (alt-m.org/2015/11/11/hap…) warned me not to put all my eggs in the "free banking" basket. So I wrote about all sorts of stuff. Would that this would have sufficed to get my colleagues to scatter rose petals along my career path!

But even my first book, _The Theory of Free Banking_ wasn't a plea for a revival of Scottish-style banking ca. 1830. In turning to policy, it assumes a fiat regime; its main argument is that competititive note issuance can help stabilize MV, reducing the need for an activist CB.

In fact, I've long since accepted that there isn't a snowflakes chance in hell of seeing U.S. commercial banks issue paper currency again. But the lessons of that book seem to me potentially applicable to digital alternatives as well.

Indeed, the study of "free banking" more generally seems to me today extremely relevant to thinking about the future of digital currency. Many critics of stablecoins obviously think so. Alas, they know only tiny bits of that history, if that. alt-m.org/2021/07/06/the…

But saying that people should take that history seriously (instead of cherry-picking the worst episodes, and misrepresenting what went awry in them, as Gorton and Zhang do in their recent WP) isn't pleading for turning back the clock, or for monetary laissez faire.

So, if I clarify the record of past "private currency" arrangements, or point to the possibility that certain new ones might work well without any need for heavy-handed government regulations, kindly don't dismiss my arguments as those of a died-in-the-wool anarcho capitalist!

Instead, consider that my "kooky" point of view may have exposed me to some facts and possibilities others have overlooked.

Thanks!

@threadreaderapp, kindly unroll.

(You read that right: I was taking the desirability of what's now called "NGDP level targeting" for granted in the early 1980s. My book explains my reasons for so doing, albeit using different terms.)

Sorry: "dyed" in the wool!