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One world money, then and now

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  • Michael Bordo

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  • 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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Suggested Citation

  • Michael Bordo & Harold James, 2006. "One world money, then and now," International Economics and Economic Policy, Springer, vol. 3(3), pages 395-407, December.
  • Handle: RePEc:kap:iecepo:v:3:y:2006:i:3:p:395-407
    DOI: 10.1007/s10368-006-0070-4
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    File URL: http://hdl.handle.net/10.1007/s10368-006-0070-4
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. John Williamson, 2006. "A worldwide system of reference rates," International Economics and Economic Policy, Springer, vol. 3(3), pages 341-352, December.
    2. Michael Bordo & Harold James, 2012. "Reserves and Baskets," Open Economies Review, Springer, vol. 23(1), pages 113-127, February.
    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. 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.
    5. Michael D. Bordo & Richard N. Cooper, 2006. "Proposal for a Common Currency among Rich Democracies," Working Papers 127, Oesterreichische Nationalbank (Austrian Central Bank).
    6. 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.
    7. 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, February.

    More about this item

    Keywords

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

    JEL classification:

    • N20 - Economic History - - Financial Markets and Institutions - - - General, International, or Comparative
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System

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