One World Money, Then and Now

Michael Bordo and Harold James

No 12189, NBER Working Papers from National Bureau of Economic Research, Inc

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.

JEL-codes: E42 F33 N20 (search for similar items in EconPapers)
Date: 2006-05
New Economics Papers: this item is included in nep-cba, nep-fdg, nep-fmk, nep-his, nep-hpe, nep-mac and nep-mon
Note: DAE ME
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Citations: View citations in EconPapers (9)

Published as Bordo, Michael and Harold James. "One World Money, Then and Now." International Economics and Economic Policy 3, 3-4 (December 2006): 395-407.

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