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Friedman Versus Hayek on Private Outside Monies: New Evidence for the Debate

17 Pages Posted: 10 May 2011 Last revised: 21 Aug 2012

William J. Luther

Kenyon College; American Institute for Economic Research

Multiple version iconThere are 2 versions of this paper

Date Written: May 4, 2011


Friedrich Hayek is often credited with the resurgence of interest in alternative monetary systems. His own proposal, however, received sharp criticism from Milton Friedman, Stanley Fischer, and others at the outset and never gained much support among academic economists or the wider population. According to Friedman, Hayek erred in believing that the mere admission of competing private currencies will spontaneously generate a more stable monetary system. In Friedman’s view, network effects and switching costs discourage an alternative system from emerging in general and prevent Hayek’s system from functioning as desired in particular. I offer new evidence provided by recent events in Somalia as support for Friedman’s initial doubts.

Keywords: Comparative Monetary Systems, Competitive Monies, Denationalisation of Money, Friedman, Government and the Monetary System, Hayek, Medium of Exchange, Money, Monetary Standards, Monetary Regimes, Network Effects, Regulation

JEL Classification: B20, B22, B25, B30, B31, B53, E02, E41, E42, E52, G21, G28

Suggested Citation

Luther, William J., Friedman Versus Hayek on Private Outside Monies: New Evidence for the Debate (May 4, 2011). Available at SSRN: or

William Luther (Contact Author)

Kenyon College ( email )

Gambier, OH 43022
United States


American Institute for Economic Research

PO Box 1000
Great Barrington, MA 01230
United States

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