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One world money, then and now

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  • Michael Bordo

    ()

  • Harold James

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.

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Bibliographic Info

Article provided by Springer in its journal International Economics and Economic Policy.

Volume (Year): 3 (2006)
Issue (Month): 3 (December)
Pages: 395-407

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Handle: RePEc:kap:iecepo:v:3:y:2006:i:3:p:395-407

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Web page: http://www.springerlink.com/link.asp?id=111059

Related research

Keywords: World currency; Dollarization; Monetary union; N20; F33; E42;

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References

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  1. Michael P. Dooley & David Folkerts-Landau & Peter Garber, 2003. "An Essay on the Revived Bretton Woods System," NBER Working Papers 9971, National Bureau of Economic Research, Inc.
  2. Eichengreen, B, 1996. "A More Perfect Union? The Logic of Economic Integration," Princeton Essays in International Economics 198, International Economics Section, Departement of Economics Princeton University,.
  3. Michael A. Clemens & Jeffrey G. Williamson, 2000. "Where did British Foreign Capital Go? Fundamentals, Failures and the Lucas Paradox: 1870-1913," NBER Working Papers 8028, National Bureau of Economic Research, Inc.
  4. Michael D. Bordo & Marc Flandreau, 2001. "Core, Periphery, Exchange Rate Regimes, and Globalization," Sciences Po publications n°3077, Sciences Po.
  5. Tamim Bayoumi & Barry Eichengreen, 1992. "Shocking Aspects of European Monetary Unification," NBER Working Papers 3949, National Bureau of Economic Research, Inc.
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  7. Eichengreen, B., 1992. "Should the Maastricht Treaty be Saved?," Princeton Studies in International Economics 74, International Economics Section, Departement of Economics Princeton University,.
  8. Jeffrey A. Frankel, 1999. "No Single Currency Regime is Right for All Countries or At All Times," NBER Working Papers 7338, National Bureau of Economic Research, Inc.
  9. Mundell, Robert, 2012. "The case for a world currency," Journal of Policy Modeling, Elsevier, vol. 34(4), pages 568-578.
  10. Guillermo A. Calvo & Carmen M. Reinhart, 2000. "Fear of Floating," NBER Working Papers 7993, National Bureau of Economic Research, Inc.
  11. Frankel, Jeffrey A & Rose, Andrew K, 1996. "The Endogeneity of the Optimum Currency Area Criteria," CEPR Discussion Papers 1473, C.E.P.R. Discussion Papers.
  12. Einaudi, Luca, 2001. "Money and Politics: European Monetary Unification and the International Gold Standard (1865-1873)," OUP Catalogue, Oxford University Press, number 9780199243662, September.
  13. Goodhart, Charles A. E., 1998. "The two concepts of money: implications for the analysis of optimal currency areas," European Journal of Political Economy, Elsevier, vol. 14(3), pages 407-432, August.
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Cited by:
  1. Paul Welfens, 2006. "Comments on R. Cooper, M. Bordo and H. James: A Schumpetrian view on monetary integration options and historical dynamics," International Economics and Economic Policy, Springer, vol. 3(3), pages 415-419, December.
  2. John Williamson, 2006. "A Worldwide System of Reference Rates," Working Papers 45, Bank of Greece.
  3. Alexandros E. Milionis, 2006. "An Alternative Definition of Market Efficiency and some Comments on its Empirical Testing," Working Papers 50, Bank of Greece.
  4. Michael D. Bordo & Richard N. Cooper, 2006. "Proposal for a Common Currency among Rich Democracies," Working Papers 127, Oesterreichische Nationalbank (Austrian Central Bank).
  5. Hermann Remsperger & Adalbert Winkler, 2009. "Welchen Einfluss hat der Wechselkurs auf die internationale Rolle von US-Dollar und Euro?," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 10(1), pages 21-38, 02.
  6. Sergio Schmukler, 2006. "Comments on R. Cooper, M. Bordo and H. James: Exchange rate arrangements and disarrangements: prospects for a world currency," International Economics and Economic Policy, Springer, vol. 3(3), pages 409-414, December.

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