Rothbard on Gold
What would people use for money in a genuine free market? A lot of people answer the question in this way. We really don’t know the answer for sure. It would be up to the people who live in that society. Because in a genuine free market, there would be no state at all, there would be no money mandated by the state. People would compete to establish the money they liked best. Maybe people would settle on a gold or silver standard, as they had done in the past. But maybe they wouldn’t. They might prefer electronic currency like bitcoin. Or maybe there would be all sorts of different monies, with no clear winner.
Murray Rothbard doesn’t agree with this. He was aware of competitive money, because F.A. Hayek had suggested it. People have the right to offer competing monies, as Hayek advocated. But Murray thought they would be unlikely to do this. The competition had already taken place, and precious metals were the winner. Why go through the same process again? As Murray explains in his great article, “The Case for a Genuine Gold Dollar”:
“In recent years an increasing number of economists have understandably become disillusioned by the inflationary record of fiat currencies. They have therefore concluded that leaving the government and its central bank power to fine tune the money supply, but abjuring them to use that power wisely in accordance with various rules, is simply leaving the fox in charge of the proverbial henhouse. They have come to the conclusion that only radical measures can remedy the problem, in essence the problem of the inherent tendency of government to inflate a money supply that it monopolizes and creates. That remedy is no less than the strict separation of money and its supply from the state.
The best known proposal to separate money from the state is that of F.A. Hayek and his followers. Hayek’s ‘denationalization of money’ would eliminate legal tender laws, and allow every individual and organization to issue its own currency, as paper tickets with its own names and marks attached. The central government would retain its monopoly over the dollar, or franc, but other institutions would be allowed to compete in the money creation business by offering their own brand name currencies. Thus, Hayek would be able to print Hayeks, the present author to issue Rothbards, and so on. Mixed in with Hayek’s suggested legal change is an entrepreneurial scheme by which a Hayek-inspired bank would issue ‘ducats,’ which would be issued in such a way as to keep prices in terms’ of ducats constant. Hayek is confident that his ducat would easily out-compete the inflated dollar, pound, mark, or whatever.
Hayek’s plan would have merit if the thing—the commodity—we call ‘money’ were similar to all other goods and services. One way, for example, to get rid of the inefficient, backward, and sometimes despotic U.S. Postal Service is simply to abolish it; but other free market advocates propose the less radical plan of keeping the post office intact but allowing any and all organizations to compete with it. These economists are confident that private firms would soon be able to outcompete the post office. In the past decade, economists have become more sympathetic to deregulation and free competition, so that superficially denationalizing or allowing free competition in currencies would seem viable in analogy with postal services or fire-fighting or private schools.
There is a crucial difference, however, between money and all other goods and services. All other goods, whether they be postal service or candy bars or personal computers, are desired for their own sake, for the utility and value that they yield to consumers. Consumers are therefore able to weigh these utilities against one another on their own personal scales of value. Money, however, is desired not for its own sake, but precisely because it already functions as money, so that everyone is confident that the money commodity will be readily accepted by any and all in exchange. People eagerly accept paper tickets marked ‘dollars’ not for their aesthetic value, but because they are sure that they will be able to sell those tickets for the goods and services they desire. They can only be sure in that way when the particular name, ‘dollar,’ is already in use as money.
Hayek is surely correct that a free market economy and a devotion to the right of private property requires that everyone be permitted to issue
Article from Mises Wire