Money and (central) banking

Lecture handout: Money and central banking*

Textbook Reading: Chapter 7 (Section 7.3; pp. 216-225)

“I’m very interested to watch the crypto community relearn centuries of monetary economics” John Cochrane (Conversations with Tyler, March 10th 2021)

Can someone really understand crypto currencies and the future of digital money without having a solid grasp of why money even exists? This topic is a great example of why historic knowledge and theoretical clarity are crucial when involved in fast changing industries – it provides a benchmark to verify the bold claims made by industry practitioners. The purpose of this lecture is to gain a deep understanding of what money is and how it has evolved.

Background readings:
  • Menger, C., 1892, “On the Origins of Money” Economic Journal, 2:239-55
  • Radford, R.A., 1945, “The Economic Organization of a P.O.W. Camp”, Economica, 12(48):189-201
Recommended readings:
Recommended audio:
Recommended video:

Here is a standard historical overview of money:

This is a great lecture video, by the late Steve Horwitz, summarising Carl Menger’s work on the origins of money:

If you are totally new to concepts like blockchain, bitcoin and NFTs and want a thorough account of the history and development, in a well produced an informative documentary that takes a highly skeptical and cynical approach, I recommend this:

For a more positive view of NFTs, an identification of the context in which they’ve emerged (post global financial crisis and great stagnation), and subjectivist approach to value, see this Twitter thread.

Some argue that Bitcoin’s main value is as a focal point for crypto more broadly. In this sense it is like Kerrygold butter. See:

  • Bailey, Andrew M. and Warmke, C., “Bitcoin is King”, Chapter 10 [PDF here]
Learning Objectives: Understand the origins of money.