Network Effects and Hayek’s Proposal for Competing Monies
نویسندگان
چکیده
Given the renewed interest in alternative monetary systems, it is conceivable that some may reconsider Hayek’s proposal for competing monies. I attempt to show that Hayek underestimates the importance of network effects. As a result, his confidence in believing the mere admission of competing private currencies will spontaneously generate a more stable monetary system is unfounded. After reviewing Hayek’s proposal and detailing the historical significance of network effects, I draw on the modern theoretical literature concerning currency acceptance to offer a general solution for entrepreneurs attempting to provide the type of monies Hayek recommends. JEL Codes: B53, E42
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