The Use of Local Knowledge in Civil Society: Applying Hayekian Insights to Charity and Nonprofits
In: Free Market Institute Research Paper No. 4739316
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In: Free Market Institute Research Paper No. 4739316
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In: Free Market Institute Research Paper No. 4653165
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In: Journal of institutional economics, Band 12, Heft 3, S. 677-698
ISSN: 1744-1382
AbstractThe Chettiar banking system evolved and functioned in the absence of a government sponsored central bank in 19th-century India. I find that the underlying common social institution of caste was crucial for the workings of the banking system and effectively acted as a club. Exclusion was achieved by restricting membership by birth and the practice of endogamy. These mechanisms created the necessary incentives to provide meaningful rules as well as their enforcement. I describe and analyze the privately provided self-regulatory mechanisms of clearinghouses, inter-bank lending and information sharing. The Chettiar banking system thus adds to existing instances of self-regulated banking as well as points to the economic underpinnings of caste as an institution.
In: The independent review: journal of political economy, Band 18, Heft 1
ISSN: 1086-1653
Economists who otherwise favor a free market in monetary and banking services have engaged in long-standing debate regarding banks' ability to affect the money supply and the exact nature of that effect. Under fractional reserves, banks issue notes or checking deposits that circulate in place of money proper, in excess of the level of reserves that would be required to redeem them all at one time. Hence, the focus of this debate is on the level and creation of inside money or banks' ability to affect money supply. However, there seems to be agreement on either side regarding the market's creation of outside money or money proper. Both sides tend to favor some sort of commodity money or several competing commodity monies over central banks' creation of fiat base money. This essay contributes to the historical aspect of the debate. The main issue is whether historical episodes of banks' keeping fractional reserves and affecting money supply in a truly laissez-faire setting exist or not. Adapted from the source document.
In: The quarterly review of economics and finance, Band 51, Heft 4, S. 360-367
ISSN: 1062-9769
In: Economic affairs: journal of the Institute of Economic Affairs, Band 38, Heft 2, S. 197-206
ISSN: 1468-0270
AbstractElectronic monies such as Bitcoin and mobile money have become popular in recent times. However, unlike with bitcoin, attempts to classify M‐Pesa theoretically have been rare. This article classifies M‐Pesa as a privately issued inside money, which evolved as an entrepreneurial response to the lack of traditional monies. It describes the institutional framework within which M‐Pesa and other monies evolved while highlighting how competitive forces led to mutual acceptance of competing inside monies, lower prices as well as greater choice for consumers. The case of M‐Pesa and other electronic monies illustrates the potential even today for entrepreneurial and market processes in money given the right institutional setting, especially in developing countries.
In: Economic Affairs, Band 38, Heft 2, S. 197-206
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In: 2017. Review of Austrian Economics, Vol. 30. Issue. 3.
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In: Journal of institutional economics, Band 17, Heft 6, S. 897-911
ISSN: 1744-1382
AbstractThe implications of Knightian uncertainty are frequently discussed in the context of market-based institutional settings. Given money prices, entrepreneurs can engage in calculative action, in conjunction with 'judgment', to guide decision-making and bring about a coordination of production plans with consumer preferences. However, if the existence of Knightian uncertainty isubiquitous and applies to all human action, then what are its implications in non-market institutional settings? This paper explores questions related to the implications of Knightian uncertainty for two important non-market institutional settings: democratic government and the nonprofit or philanthropic sector, where there is an explicit lack of monetary calculation, yet nonprofit and political entrepreneurs still must use 'judgment' to deal with Knightian uncertainty. For instance, what are the implications of private property and privatized cost in the case of nonprofitsversusthe absence of private property and socialized cost in the case of democracy, in the presence of Knightian uncertainty? Which group of 'consumers' is likely to have their preferences satisfied when it comes to nonprofits (benefactors or beneficiaries) and democratic government (voters or lobbyists)? The paper, thus, points to the importance of further research on the implications of Knightian uncertainty in the hard case of non-market institutional settings.