Malignant Monetary Monocentricity
Independent Review, Forthcoming
25 Pages Posted: 8 Feb 2020
Date Written: January 20, 2020
I develop the idea of malignant monetary monocentricity: that contemporary central banks are systematically unlikely to deliver macroeconomic stability due to institutionally entrenched information and incentive problems. I also argue that polycentric monetary systems, best approximated by historical free banking systems, are information- and incentive-compatible in terms of delivering macroeconomic stability. I conclude by demonstrating why monetary monocentricity is incompatible with democratic self-governance, and that the only way to cure the malignancy is to replace monetary monocentricity with monetary polycentricity.
Keywords: central banking, democracy, monetary policy, polycentricity, self-governance
JEL Classification: E52, E58, P16
Suggested Citation: Suggested Citation