From 'annuity notes' to bank notes: a change in Bentham's theory of money

The paper aims at studying why and how, in a very short time – from Circulating Annuities (1800) to Paper Mischief (1800-1801) and The True Alarm ([Sur les prix], 1801) – Jeremy Bentham radically changed his way of formulating the problem of money and his conception of what should be done to solve it. He switched from a plan to create a new public money (a title of public debt bearing interest) to a plan to improve a private existing money (the bank note). So doing he maintained an approach based on individual behaviour toward money, but abandoned a question – does money being a financial asset ensure its use as a means of payment? – for another one – what is the role of confidence in the acceptance of bank money? We show that this shift was not only the outcome of circumstances but also the consequence of Bentham’s right perception that bearing interest was not enough to ensure the use of money. This is still a pending issue in the modern microeconomic theory of money.