Huerta De Soto’s Concerted Expansion: A Prisoner’s Dilemma in Free Banking?

Laissez-Faire 38-39:1-6

11 Pages Posted: 27 Jan 2011 Last revised: 15 Mar 2014

See all articles by Nicolas Cachanosky

Nicolas Cachanosky

Metropolitan State University of Denver; American Institute for Economic Research

Date Written: January 21, 2012

Abstract

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 [2006], 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

Cachanosky, Nicolas, Huerta De Soto’s Concerted Expansion: A Prisoner’s Dilemma in Free Banking? (January 21, 2012). Laissez-Faire 38-39:1-6. Available at SSRN: https://ssrn.com/abstract=1749689 or http://dx.doi.org/10.2139/ssrn.1749689

Nicolas Cachanosky (Contact Author)

Metropolitan State University of Denver ( email )

Student Success Building
890 Auraria Pkwy #310
Denver, CO 80217
United States

HOME PAGE: http://www.ncachanosky.edu

American Institute for Economic Research

PO Box 1000
Great Barrington, MA 01230
United States

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