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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.

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