Huerta De Soto’s Concerted Expansion: A Prisoner’s Dilemma in Free Banking?
11 Pages Posted: 27 Jan 2011 Last revised: 15 Mar 2014
Date Written: January 21, 2012
Concerted expansion is a common concern in free banking. This situation is sometimes expressed as a prisoner’s dilemma game, as Huerta de Soto (1998 , pp. 664-671) does to show that banks have incentives to collude and expand fiduciary media. This approach, however, does not accurately describe the problem; the prisoner’s dilemma provides an unsound description of concerted expansion in free banking. This commentary focuses on six limitations to applying the prisoner’s dilemma game to model concerted expansion in free banking.
Keywords: free banking, fractional reserves, concerted expansion, prisoner’s dilemma
JEL Classification: E50, E51
Suggested Citation: Suggested Citation