One world money, then and now

Michael Bordo, Harold James

Research output: Contribution to journalArticlepeer-review

7 Scopus citations

Abstract

The case for monetary simplification and unification has been made since the middle of the nineteenth century. It rests on four principal arguments; reduced transaction costs; establishing credibility; preventing bad policy in other states; political integration via money. In this paper we argue that the case for monetary integration is becoming increasingly less persuasive. In making our case we posit a different concept of money to the one that underlay the nineteenth century discussions which we term "Newtonian" since it was based on the assumption of a single reference external to the state reflected in the definition of value in terms of precious metals. In the twentieth century, views of money have shifted to a more "Einsteinian" or relativistic conception. Measures of value that move relative to each other are helpful in terms of dealing with large shifts in relative prices that affect different countries very differently. In the current age of globalization, "Einsteinian" money is capable of accommodating shifts that were politically destructive in the "Newtonian" world.

Original languageEnglish (US)
Pages (from-to)395-407
Number of pages13
JournalInternational Economics and Economic Policy
Volume3
Issue number3-4
DOIs
StatePublished - Dec 2006

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics

Keywords

  • Dollarization
  • Monetary union
  • World currency

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