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Accounting for Non-Interest-Bearing Currency: A Critique of the ‘Legal Restrictions’ Theory of Money

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  • White, Lawrence H.

Abstract

The legal restrictions theory of money, developed by Neil Wallace and others, implies that all noncommodity currency would be interest bear ing under laissez faire (if the interest rate on bonds is positive). This note cites historical evidence to the contrary. It then analyzes the source of the legal restrictions theory's inapplicability, and o ffers an alternative computation-cost-based explanation for nonintere st-bearing currency. Copyright 1987 by Ohio State University Press.
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  • White, Lawrence H., 1985. "Accounting for Non-Interest-Bearing Currency: A Critique of the ‘Legal Restrictions’ Theory of Money," Working Papers 85-35, C.V. Starr Center for Applied Economics, New York University.
  • Handle: RePEc:cvs:starer:85-35
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    1. Deep money, the coexistence puzzle, and the legal restrictions hypothesis
      by JP Koning in Moneyness on 2014-05-24 08:31:00

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    1. repec:dau:papers:123456789/11496 is not listed on IDEAS
    2. Laurence Scialom, 1995. "Les modèles de paiements concurrentiels : éléments d'analyse critique ," Revue Économique, Programme National Persée, vol. 46(1), pages 35-55.
    3. David Andolfatto, 2005. "On the Coexistence of Money and Bonds," 2005 Meeting Papers 9, Society for Economic Dynamics.
    4. Boettke Peter, 1990. "The Political Economy Of Utopia : Communism In Soviet Russia, 1918–1921," Journal des Economistes et des Etudes Humaines, De Gruyter, vol. 1(2), pages 1-48, June.
    5. Quinn, Stephen, 1997. "Goldsmith-Banking: Mutual Acceptance and Interbanker Clearing in Restoration London," Explorations in Economic History, Elsevier, vol. 34(4), pages 411-432, October.
    6. Cesarano, Filippo, 1995. "The New Monetary Economics and the theory of money," Journal of Economic Behavior & Organization, Elsevier, vol. 26(3), pages 445-455, May.
    7. Richard C.K.Burdekin & Marc D.Weidenmier, 2002. "Interest-Bearing Currency and Legal Restrictions Theory:Lessons from the Southern Confederacy," Cato Journal, Cato Journal, Cato Institute, vol. 22(2), pages 199-209, Fall.
    8. Tarkka, Juha, 1994. "Risk sharing in the pricing of payment services by banks," Research Discussion Papers 18/1994, Bank of Finland.

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