F.A. Hayek and his rational choice of monetary arrangements

Sahoo, Ganeswar (2012): F.A. Hayek and his rational choice of monetary arrangements.

Abstract

This paper addresses the perspective of Hayek’s doctrine on monetary arrangements in the economy and his favorable argument for an international central bank over national central bank. I also discussed Hayek’s view on free banking (i.e. for the free issue of bank notes) that would enable the banks to provide more and cheaper credit. Furthermore, Hayek comes up with an intellectual debate on “rational choice” of monetary arrangements whether the commercial banks should have the right to issue bank notes (demand for free banking) which can be redeemable in the established national gold or silver currency or an international central bank.

This paper focuses on Hayek’s overall philosophy on international money mechanism and his intellectual debate of rational choice between the two arrangements – free banking or an international central bank and his concerned over unstable arrangements in money mechanism,which, he believes, profoundly affects economic and social conditions of people and government. Therefore, to reach the conclusion, I outlined Hayek’s perspectives on central bank and government, then international gold standard, and finally, his choice between free banking and an international central banking which is central theme of this paper.

• Item Type: MPRA Paper
• Language: English
• Keywords: Money, Banking, Central Bank, Free Banking, Monetary Nationalism
• Subjects: E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E31 - Price Level ; Inflation ; Deflation; E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E51 - Money Supply ; Credit ; Money Multipliers; B - History of Economic Thought, Methodology, and Heterodox Approaches > B2 - History of Economic Thought since 1925 > B22 - Macroeconomics; E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E44 - Financial Markets and the Macroeconomy; E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E42 - Monetary Systems ; Standards ; Regimes ; Government and the Monetary System ; Payment Systems; E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E58 - Central Banks and Their Policies; E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E52 - Monetary Policy; E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E41 - Demand for Money; B - History of Economic Thought, Methodology, and Heterodox Approaches > B5 - Current Heterodox Approaches > B53 - Austrian

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