IDEAS home Printed from
MyIDEAS: Login to save this article or follow this journal

Adaptive Learning and the Transition to Fiat Money

  • George Selgin

    (University of Georgia)

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.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
File Function: link to full text
Download Restriction: Access to full text is restricted to subscribers.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

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

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

in new window

Handle: RePEc:ecj:econjl:v:113:y:2003:i:484:p:147-165
Contact details of provider: Postal: Office of the Secretary-General, School of Economics and Finance, University of St. Andrews, St. Andrews, Fife, KY16 9AL, UK
Phone: +44 1334 462479
Web page:

More information through EDIRC

Order Information: Web:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Selgin, G., 1993. "On Ensuring the Acceptability of a New Fiat Money," Papers 368, Georgia - College of Business Administration, Department of Economics.
  2. Jones, Robert A, 1976. "The Origin and Development of Media of Exchange," Journal of Political Economy, University of Chicago Press, vol. 84(4), pages 757-75, August.
  3. Hayashi, Fumio & Matsui, Akihiko, 1996. "A Model of Fiat Money and Barter," Journal of Economic Theory, Elsevier, vol. 68(1), pages 111-132, January.
  4. Lui, Francis T, 1983. "Cagan's Hypothesis and the First Nationwide Inflation of Paper Money in World History," Journal of Political Economy, University of Chicago Press, vol. 91(6), pages 1067-74, December.
  5. Alchian, Armen A, 1977. "Why Money?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 9(1), pages 133-40, February.
  6. 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.
  7. Herschel I. Grossman, 1991. "Monetary Economics: A Review Essay," NBER Working Papers 3686, National Bureau of Economic Research, Inc.
  8. Iwai, Katsuhito, 1996. "The bootstrap theory of money: A search-theoretic foundation of monetary economics," Structural Change and Economic Dynamics, Elsevier, vol. 7(4), pages 451-477, December.
  9. Friedman, Milton, 1986. "The Resource Cost of Irredeemable Paper Money," Journal of Political Economy, University of Chicago Press, vol. 94(3), pages 642-47, June.
  10. Ellison, Glenn & Fudenberg, Drew, 1993. "Rules of Thumb for Social Learning," Scholarly Articles 3196332, Harvard University Department of Economics.
  11. Joseph A. Ritter, 1994. "The transition from barter to fiat money," Working Papers 1994-004, Federal Reserve Bank of St. Louis.
  12. Angela Redish, 1993. "Anchors Aweigh: The Transition from Commodity Money to Fiat Money in Western Economies," Canadian Journal of Economics, Canadian Economics Association, vol. 26(4), pages 777-95, November.
  13. David, Paul A, 1985. "Clio and the Economics of QWERTY," American Economic Review, American Economic Association, vol. 75(2), pages 332-37, May.
  14. Selgin, George & White, Lawrence H, 1999. "A Fiscal Theory of Government's Role in Money," Economic Inquiry, Western Economic Association International, vol. 37(1), pages 154-65, January.
  15. Kiyotaki, Nobuhiro & Wright, Randall, 1993. "A Search-Theoretic Approach to Monetary Economics," American Economic Review, American Economic Association, vol. 83(1), pages 63-77, March.
  16. Marimon, Ramon & McGrattan, Ellen & Sargent, Thomas J., 1990. "Money as a medium of exchange in an economy with artificially intelligent agents," Journal of Economic Dynamics and Control, Elsevier, vol. 14(2), pages 329-373, May.
  17. S. Rao Aiyagari & Neil Wallace, 1995. "Government transaction policy, the medium of exchange, and welfare," Working Papers 516, Federal Reserve Bank of Minneapolis.
  18. Katz, Michael L & Shapiro, Carl, 1985. "Network Externalities, Competition, and Compatibility," American Economic Review, American Economic Association, vol. 75(3), pages 424-40, June.
  19. Kiyotaki, Nobuhiro & Wright, Randall, 1989. "On Money as a Medium of Exchange," Journal of Political Economy, University of Chicago Press, vol. 97(4), pages 927-54, August.
  20. Freeman, Scott J, 1989. "Fiat Money as a Medium of Exchange," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 30(1), pages 137-51, February.
  21. Arthur, W Brian, 1989. "Competing Technologies, Increasing Returns, and Lock-In by Historical Events," Economic Journal, Royal Economic Society, vol. 99(394), pages 116-31, March.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:ecj:econjl:v:113:y:2003:i:484:p:147-165. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing)

or (Christopher F. Baum)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.