A Theory of Self-Enforcing Monetary Constitutions With Reference to the Suffolk System, 1825–1858

33 Pages Posted: 16 May 2018 Last revised: 21 Oct 2018

See all articles by Alexander William Salter

Alexander William Salter

Texas Tech University - Rawls College of Business; American Institute for Economic Research

Andrew T. Young

Texas Tech University - Rawls College of Business

Date Written: October 21, 2018

Abstract

We develop a theory of self-enforcing monetary constitutions. A monetary constitution is the framework of rules within which money-providing and money-using agents interact. A self-enforcing monetary constitutions is upheld by the agents acting within the system; it thus does not require external enforcement. We describe how the institutional technology of polycentric sovereignty applies to monetary constitutions, and show how the 19th century Suffolk banking system was characterized by polycentric sovereignty, rendering its (de facto) monetary constitution self-enforcing. We conclude by briefly discussing the implications of our analysis for the role of the state in maintaining healthy money and banking systems.

Keywords: Free Banking, Monetary Constitution, Political Property Rights, Polycentricity, Sovereignty, Suffolk System

JEL Classification: E50, H11, N21, P16

Suggested Citation

Salter, Alexander William and Young, Andrew T., A Theory of Self-Enforcing Monetary Constitutions With Reference to the Suffolk System, 1825–1858 (October 21, 2018). AIER Sound Money Project Working Paper No. 2018-14; Journal of Economic Behavior and Organization, Forthcoming. Available at SSRN: https://ssrn.com/abstract=3173294 or http://dx.doi.org/10.2139/ssrn.3173294

Alexander William Salter (Contact Author)

Texas Tech University - Rawls College of Business ( email )

Lubbock, TX 79409
United States

HOME PAGE: http://awsalter.com

American Institute for Economic Research

PO Box 1000
Great Barrington, MA 01230
United States

Andrew T. Young

Texas Tech University - Rawls College of Business ( email )

Lubbock, TX 79409
United States

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