The Monetary System of the Well-Ordered Society

43 Pages Posted: 11 Sep 2020

Date Written: April 12, 2020


Monetary systems are elementary social institutions but have rarely been studied by contemporary political philosophers. The burgeoning economic literature on monetary systems, on the other hand, is hardly ever informed by philosophical considerations. This article provides a step towards bridging the gap. It aims to identify the monetary system that a society well ordered by Rawls’s justice as fairness would adopt. The monetary systems the study evaluates are free banking, which leaves monetary affairs entirely to the market; sovereign money, in which the state monopolizes control of the monetary system; and a hybrid of these corresponding to present-day monetary arrangements. The choice among these systems has wide-ranging consequences for public order, political liberties, freedom of association, the independence of government from monied interests and the options for predistribution in a society. These undertheorized linkages are discussed and institutional propositions for increasing monetary systems’ compliance with the stipulations of justice as fairness are made. The well-ordered society adopts a customized hybrid system, in which monetary authority is equally shared between banks and government. However, a sovereign money system is shown to correspond better with widespread moral convictions in a variety of ways.

Keywords: John Rawls, justice as fairness, monetary systems, free banking, sovereign money, fractional reserve banking, central bank independence, monetary policy, predistribution

Suggested Citation

Schmerzeck, Georg, The Monetary System of the Well-Ordered Society (April 12, 2020). Available at SSRN: or

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