Chronic Specie Scarcity and Efficient Barter: The Problem of Maintaining an Outside Money Supply in British Colonial America

Farley Grubb

No 18099, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Colonial Americans complained that gold and silver coins (specie) were chronically scarce. These coins could be acquired only through importation. Given unrestricted trade in specie, market arbitrage should have eliminated chronic scarcity. A model of efficient barter and local inside money is developed to show how chronic specie scarcity in colonial America could prevail despite unrestricted specie-market arbitrage, thus justifying colonial complaints. The creation of inside paper monies by colonial governments was a welfare-enhancing response to preexisting chronic specie scarcity, not the cause of that scarcity.

JEL-codes: B12 B22 B31 D61 E41 E42 E51 E52 F11 F41 F54 N11 N21 N41 (search for similar items in EconPapers)
Date: 2012-05
New Economics Papers: this item is included in nep-his and nep-mon
Note: DAE
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Citations: View citations in EconPapers (3)

Published as Farley Grubb, “A Transaction-Cost Model of Chronic Specie Scarcity and the Evolution of Monetary Structures in Constrained Colonial Economies,” Cliometrica, February 2025, Open Access.

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Working Paper: Chronic Specie Scarcity and Efficient Barter: The Problem of Maintaining an Outside Money Supply in British Colonial America (2012)
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