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Adaptive Learning and the Transition to Fiat Money

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  • George Selgin

    (University of Georgia)

Abstract

This article explores some implications of adaptive learning for monetary evolution using a search--theoretic framework that allows for media--of--exchange network effects. Adaptive learning precludes any voluntary transition to a fiat standard from a non--monetary state of nature and can account for the historically--observed tendency for fiat monetary standards to emerge only following the prior appearance of commodity money and the widespread employment of redeemable banknotes. Adaptive learning can also account for governments" frequent resort to coercive measures to force a switch to fiat money and for their ability to affect such a switch even when doing so is not Pareto optimal. Copyright Royal Economic Society 2003.

Suggested Citation

  • George Selgin, 2003. "Adaptive Learning and the Transition to Fiat Money," Economic Journal, Royal Economic Society, vol. 113(484), pages 147-165, January.
    • Handle: RePEc:ecj:econjl:v:113:y:2003:i:484:p:147-165
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    3. Zeira, Joseph & Levintal, Oren, 2009. "The Evolution of Paper Money," CEPR Discussion Papers 7362, C.E.P.R. Discussion Papers.
    4. Dror Goldberg, 2012. "The tax-foundation theory of fiat money," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 50(2), pages 489-497, June.
    5. Diarmid Weir, 2013. "Fiat Money, Individual Rationality and Production," Metroeconomica, Wiley Blackwell, vol. 64(4), pages 573-590, November.
    6. Walter blocher & Andreas Hanl & Jochen Michaelis, 2017. "Revolutionieren Kryptowährungen die Zahlungssysteme?," MAGKS Papers on Economics 201748, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    7. Selgin, George, 2015. "Synthetic commodity money," Journal of Financial Stability, Elsevier, vol. 17(C), pages 92-99.
    8. Ahmed Mehedi Nizam, 2023. "An analysis of transnational transfer of wealth through cross-border financial transactions," SN Business & Economics, Springer, vol. 3(1), pages 1-31, January.
    9. Eduardo Ferraciolli & Tanya Araújo, 2023. "Agent-based Modeling and the Sociology of Money: a Framework for the Study of Coordination and Plurality," Working Papers REM 2023/0285, ISEG - Lisbon School of Economics and Management, REM, Universidade de Lisboa.
    10. Hendrickson, Joshua R. & Luther, William J., 2017. "Banning bitcoin," Journal of Economic Behavior & Organization, Elsevier, vol. 141(C), pages 188-195.
    11. Nizam, Ahmed Mehedi, 2021. "Redistribution of wealth through cross border financial transactions: A closer look," MPRA Paper 109374, University Library of Munich, Germany.
    12. Willem H. Buiter, 2003. "James Tobin: An Appreciation of his Contribution to Economics," Economic Journal, Royal Economic Society, vol. 113(491), pages 585-631, November.
    13. William Luther, 2014. "Evenly rotating economy: A new modeling technique for an old equilibrium construct," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 27(4), pages 403-417, December.
    14. Samuel E. Vazquez, 2009. "Scale Invariance, Bounded Rationality and Non-Equilibrium Economics," Papers 0902.3840, arXiv.org.
    15. Mikael Stenkula, 2003. "Carl Menger and the network theory of money," The European Journal of the History of Economic Thought, Taylor & Francis Journals, vol. 10(4), pages 587-606.
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    17. Goodhart, Charles A. E., 1998. "The two concepts of money: implications for the analysis of optimal currency areas," European Journal of Political Economy, Elsevier, vol. 14(3), pages 407-432, August.
    18. William J. Luther, 2018. "Is Bitcoin Intrinsically Worthless?," Journal of Private Enterprise, The Association of Private Enterprise Education, vol. 33(Spring 20), pages 31-45.
    19. William Luther, 2016. "Mises and the moderns on the inessentiality of money in equilibrium," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 29(1), pages 1-13, March.
    20. Tyler Watts, 2011. "The Dollar Quiz: A Hands-On Approach to Monetary Debasement and Inflation," Journal of Private Enterprise, The Association of Private Enterprise Education, vol. 27(Fall 2011), pages 145-158.

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