How 'Natural' Is the Government Monopoly Over Money
27 Pages Posted: 15 May 2016 Last revised: 17 May 2016
Date Written: June 1, 2000
This paper reviews and evaluates some of the reasons commonly advanced to explain why the production of money is a natural monopoly. Some these reasons are actually not strict natural monopoly explanations but are instead claims that the production or use of money involves some type of externality that can be internalized only by a monopoly or the government. The paper discusses these externality justifications for a government monopoly and concludes that to the extent that these externalities require a government role, they do not necessitate that the government actually engage in the production of money.
Keywords: natural monopoly, network externalities, free banking, inside money, outside money
JEL Classification: E51, E58, H23, H42, L12
Suggested Citation: Suggested Citation