Denationalisation of Money: The Argument Refined

For the Second (extended) Edition Professor Hayek has written many and sometimes lengthy additions to refine and amplify the argument. In all he has added about a third to two-fifths to the original text. (To identify the self-contained additions, both long and short, a single star is placed at the beginning and two stars at the end. There are in addition many other refinements of words, phrases and sentences, including numerous footnotes, passim.)

The Hobart Paper has now become a substantial text on the revolutionary proposal to replace state control of the money supply by competing private issuers in the market.

When this principle was put to an august personage in the British banking system the urbane but complacent reply was ‘That may be for the day after tomorrow’. This is a not uncommon reaction of practical men to the new thinking of academics. New ideas are liable to be dismissed as the work of theorists by hard-headed men who have to face the realities of everyday life. Practical men are so near their ‘day-to-day problems’ that they may see only the difficulties and obstacles and not the fundamental causes of error or failure. It is proper to reflect that the tree-feller cannot see the extent of the wood.

Even more fundamental change may sometimes have to be by radical reform rather than by piecemeal modification of a method or policy that has been shown to be defective. And the longer reform is delayed the more disturbing it may have to be. A man sinking in a bog cannot escape by a short step; his only hope may be a long leap.

The question is whether Professor Hayek’s diagnosis—that state control of money has rarely supplied a dependable means of payment but has, in practice, been responsible for destabilising currencies and down the centuries for inflation—is correct or not. If it is correct, then tinkering with government monopoly control of money will not remove the defects and dangers.

This enlarged Second Edition should be earnestly studied not least by bankers, all the more when, as in Britain, they are not as removed from governmental—which means political—influence as they are in other countries. The additions will also make the Second Edition all the more valuable for teachers and students of economics who are more concerned with fundamental truths than with short-term expedients.