January 1, 1999

A Fiscal Theory of Government's Role in Money

  • Lawrence H. White

    Distinguished Senior Fellow, F. A. Hayek Program for Advanced Study in Philosophy, Politics and Economics
  • George Selgin

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As an alternative to market failure explanations, the authors draws on theory and historical evidence to argue that fiscal considerations explain the roles governments typically play in producing and regulating money.Public monopoly production of coins and banknotes, substitution of fiat for commodity standards, and restrictions on substitutes for government money all generate revenue and especially provide means for meeting fiscal emergencies. They argue that these arrangements do not reflect conscious design so much as the evolutionary survival of the fiscally advantageous.

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