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Accounting for Non-Interest-Bearing Currency: A Critique of the ‘Legal Restrictions’ Theory of Money

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  • White, Lawrence H.

Abstract

The legal restrictions theory of money, developed by Neil Wallace and others, implies that all noncommodity currency would be interest bear ing under laissez faire (if the interest rate on bonds is positive). This note cites historical evidence to the contrary. It then analyzes the source of the legal restrictions theory's inapplicability, and o ffers an alternative computation-cost-based explanation for nonintere st-bearing currency. Copyright 1987 by Ohio State University Press.
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Suggested Citation

  • White, Lawrence H., 1985. "Accounting for Non-Interest-Bearing Currency: A Critique of the ‘Legal Restrictions’ Theory of Money," Working Papers 85-35, C.V. Starr Center for Applied Economics, New York University.
    • Handle: RePEc:cvs:starer:85-35
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Deep money, the coexistence puzzle, and the legal restrictions hypothesis
      by JP Koning in Moneyness on 2014-05-24 08:31:00
    2. The difference between two colourful bits of rectangular paper
      by JP Koning in Moneyness on 2019-04-29 15:06:00

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    Cited by:

    1. William D. Lastrapes & George Selgin, 2012. "Banknotes And Economic Growth," Scottish Journal of Political Economy, Scottish Economic Society, vol. 59(4), pages 390-418, September.
    2. repec:zbw:bofrdp:1994_018 is not listed on IDEAS
    3. Son, Jaemin & Ryu, Doojin & Webb, Robert I., 2023. "Central bank digital currency: Payment choices and commercial bank profitability," International Review of Financial Analysis, Elsevier, vol. 90(C).
    4. Quinn, Stephen, 1997. "Goldsmith-Banking: Mutual Acceptance and Interbanker Clearing in Restoration London," Explorations in Economic History, Elsevier, vol. 34(4), pages 411-432, October.
    5. Joshua R. Hendrickson, 2015. "Monetary equilibrium," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 28(1), pages 53-73, March.
    6. repec:dau:papers:123456789/11496 is not listed on IDEAS
    7. Laurence Scialom, 1995. "Les modèles de paiements concurrentiels : éléments d'analyse critique ," Revue Économique, Programme National Persée, vol. 46(1), pages 35-55.
    8. David Andolfatto, 2005. "On the Coexistence of Money and Bonds," 2005 Meeting Papers 9, Society for Economic Dynamics.
    9. Boettke Peter, 1990. "The Political Economy Of Utopia : Communism In Soviet Russia, 1918–1921," Journal des Economistes et des Etudes Humaines, De Gruyter, vol. 1(2), pages 91-138, June.
    10. Juan Carlos Pérez-Velasco, 2002. "Influencia de la Tarjetas de Débito sobre la Demanda de Efectivo," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 39(116), pages 51-93.
    11. Richard C. K. Burdekin & Marc D. Weidenmier, 2008. "Can Interest-Bearing Money Circulate? A Small-Denomination Arkansan Experiment, 1861-63," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 40(1), pages 233-241, February.
    12. Cesarano, Filippo, 1995. "The New Monetary Economics and the theory of money," Journal of Economic Behavior & Organization, Elsevier, vol. 26(3), pages 445-455, May.
    13. Tarkka, Juha, 1994. "Risk sharing in the pricing of payment services by banks," Research Discussion Papers 18/1994, Bank of Finland.
    14. Tarkka, Juha, 1994. "Risk sharing in the pricing of payment services by banks," Bank of Finland Research Discussion Papers 18/1994, Bank of Finland.

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