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Adaptive Learning and the Transition to Fiat Money

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  • George Selgin

    (University of Georgia)

Abstract

This article explores some implications of adaptive learning for monetary evolution using a search--theoretic framework that allows for media--of--exchange network effects. Adaptive learning precludes any voluntary transition to a fiat standard from a non--monetary state of nature and can account for the historically--observed tendency for fiat monetary standards to emerge only following the prior appearance of commodity money and the widespread employment of redeemable banknotes. Adaptive learning can also account for governments" frequent resort to coercive measures to force a switch to fiat money and for their ability to affect such a switch even when doing so is not Pareto optimal. Copyright Royal Economic Society 2003.

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Bibliographic Info

Article provided by Royal Economic Society in its journal The Economic Journal.

Volume (Year): 113 (2003)
Issue (Month): 484 (January)
Pages: 147-165

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Handle: RePEc:ecj:econjl:v:113:y:2003:i:484:p:147-165

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  1. Ellison, Glenn & Fudenberg, Drew, 1992. "Rules of Thumb for Social Learning," IDEI Working Papers 17, Institut d'Économie Industrielle (IDEI), Toulouse.
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  16. Dowd, Kevin & Greenaway, David, 1993. "Currency Competition, Network Externalities and Switching Costs: Towards an Alternative View of Optimum Currency Areas," Economic Journal, Royal Economic Society, vol. 103(420), pages 1180-89, September.
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Citations

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Cited by:
  1. Willem H. Buiter, 2003. "James Tobin: An Appreciation of his Contribution to Economics," Economic Journal, Royal Economic Society, vol. 113(491), pages F585-F631, November.
  2. Dror Goldberg, 2012. "The tax-foundation theory of fiat money," Economic Theory, Springer, vol. 50(2), pages 489-497, June.
  3. Ould Ahmed, Pepita & Marques-Pereira, Jaime & Le Maux, Laurent & Desmedt, Ludovic & Blanc, Jerome & Théret, Bruno, 2013. "Monetary plurality in economic theory," Economics Papers from University Paris Dauphine 123456789/11496, Paris Dauphine University.
  4. Samuel E. Vazquez, 2009. "Scale Invariance, Bounded Rationality and Non-Equilibrium Economics," Papers 0902.3840, arXiv.org.
  5. Mikael Stenkula, 2003. "Carl Menger and the network theory of money," The European Journal of the History of Economic Thought, Taylor & Francis Journals, vol. 10(4), pages 587-606.
  6. Levintal, Oren & Zeira, Joseph, 2009. "The Evolution of Paper Money," CEPR Discussion Papers 7362, C.E.P.R. Discussion Papers.
  7. Guang-Zhen Sun, 2005. "A Review Of Selected Literature In The Economics Of Division Of Labor From 5th Century To Wwii: Part I," Development Research Unit Working Paper Series 01/05, Monash University, Department of Economics.

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