Skip to main content

Origin of Money


The Free Exchange column in a recent issue of the Economist examined the role of government in the evolution of money – click here.   Karl Menger famously argued in his 1892 Economic Journal article that money evolves organically without anyone inventing it and without government intervention.  In a lesser known paper, Charles Goodhart argues for a cartalist view of the origin of money i.e., government plays a significant role in the rise of a monetary economy.  The main implication of the Mengerian view is that government should get out of money.  The main implication of the Goodhartian view is that fiscal and monetary matters are the concern of governments and the two should not be divorced as is the case with the euro.

Popular posts from this blog

How Valuable Are Connections?

Daron Acemoglu, Simon Johnson, Amir Kermani, James Kwak and Todd Mitton have written a paper on whether firms connected to Timothy Geithner benefited from these connections. They do so by looking at how stocks of these firms reacted to the announcement that he was a nominee for Treasury Secretary in November 2008. They find that there were large abnormal returns for connected firms. Below is the paper's abstract and the full paper is available here . The announcement of Timothy Geithner as nominee for Treasury Secretary in November 2008 produced a cumulative abnormal return for financial firms with which he had a connection. This return was about 6% after the first full day of trading and about 12% after ten trading days. There were subsequently abnormal negative returns for connected firms when news broke that Geithner's confirmation might be derailed by tax issues. Excess returns for connected firms may reflect the perceived impact of relying on the advice of a small ne...
Read more

Bitcoin Bubble?

According to Robert Shiller , speaking at Davos, Bitcoin is a perfect example of a bubble - story here . Shiller sees Bitcoin as a backwards step in the evolution of money.   George Selgin , a free banker, takes an opposing view - click here .  Although he doesn't believe that Bitcoin is money, he sees its development as a fascinating turn in the evolution of money. In particular, he lauds the fact that Bitcoin production is constrained and cannot be infinite. There is a short video below where Bitcoin explain how it works.
Read more

Facebook

My previous posts ( here and here ) on Facebook indicated that I thought Facebook stock was a poor investment.  Yesterday Facebook made its maiden quarterly report to the market and investors did not like what they heard.  Facebook shares were floated at $38.  In after-hours trading yesterday, they were trading at $23.75!  The Daily Telegraph's coverage of Facebook's maiden financial report is available here .
Read more