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A theory of self-enforcing monetary constitutions with reference to the Suffolk System, 1825–1858

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  • Salter, Alexander William
  • Young, Andrew T.

Abstract

We develop a theory of self-enforcing monetary constitutions. A monetary constitution is the framework of rules within which money-providing and money-using agents interact. A self-enforcing monetary constitutions is upheld by the agents acting within the system; it thus does not require external enforcement. We describe how the institutional technology of polycentric sovereignty applies to monetary constitutions, and show how the 19th century Suffolk banking system was characterized by polycentric sovereignty, rendering its (de facto) monetary constitution self-enforcing. We conclude by briefly discussing the implications of our analysis for the role of the state in maintaining healthy money and banking systems.

Suggested Citation

  • Salter, Alexander William & Young, Andrew T., 2018. "A theory of self-enforcing monetary constitutions with reference to the Suffolk System, 1825–1858," Journal of Economic Behavior & Organization, Elsevier, vol. 156(C), pages 13-22.
    • Handle: RePEc:eee:jeborg:v:156:y:2018:i:c:p:13-22
    DOI: 10.1016/j.jebo.2018.10.011
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    More about this item

    Keywords

    Free banking; Monetary constitution; Political property rights; Polycentricity; Sovereignty; Suffolk system;
    All these keywords.

    JEL classification:

    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • N21 - Economic History - - Financial Markets and Institutions - - - U.S.; Canada: Pre-1913
    • P16 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State

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