Thursday, November 06, 2008

Denationalization of Money, The Real Deal

The story is riveting in its own right, not only as monetary history but as business history. He has highlighted a fantastic industry that has long gone unnoticed. But beyond that, there is a massively important economic point. What Selgin has done here is help us to understand something critically important: were it not for the state, a wholly private money system would emerge from market exchange. That means private coinage, private weights and measures, market-driven exchange rates between different kinds of monies, and a fully private banking system to go along it with it.

In fact, this is precisely how money originates: from the within the market. Why does the state intervene? The British case is typical. The state wants to control the economy, tax the economy, and control the people. If a fully private system comes about, the state finds its job all-but impossible.[My emphasis] That is why the state takes over at the expense of private enterprise.
The state will have to become toothless for it to loose its monopoly in currency issue.

Are you ready?
In other words, the state is not responding here to a market failure but a market success. It is not a "public goods" rationale that leads to state intervention but old-fashioned jealousy over power and wealth. Selgin's book shows this not through polemics but through a completely new telling of real-life events about which we've previously known next to nothing.
Full review. (MP3 interview with Selgin on site.)