The Leap to a New Monetary Order

‘The market will not work effectively with monetary anarchy’, states James Buchanan, the Nobel Prize winning economist and a founder of the public choice school; economists should know that such anarchy can ‘only generate disorder’. This contrasts with the benefits of a constitutional order: Within a regime of stability in property rights, contracts, and money, persons will interact, one with another, to generate an order that will produce and distribute value, as determined by their own choices, which they remain at liberty to take. (Buchanan, 2010, p. 251) At the global level, we now have a state of monetary anarchy and it is producing the disorder of which Buchanan speaks. He focuses on the need, as he sees it, to ‘constitutionalize’ the US dollar; if the US did that, then other countries would continue to use the dollar as the international unit of account (p. 258). But his principal argument — insisting on the need to place money in a constitutional realm categorically separate from what he calls the Hobbesian state of anarchy — holds good for any attempt to construct an international standard for money. Sovereignty is exercised at two stages or levels — that which defines and enforces the constraints of a constitution and that which operates within the limits so defined.