Hayek's masterpiece on economic crises, free banking and inflation has been reissued

In this groundbreaking work, first published in 1976, Friedrich von Hayek argues that the government monopoly of money must be abolished to stop recurring bouts of inflation and deflation. Abolition is also the cure for the more deep-seated disease of the recurring waves of depression and unemployment attributed to 'capitalism'.

For the first time Denationalisation of Money is available as a free download in high quality pdf format (12 MB).

THE AUTHOR

FRIEDRICH AUGUST HAYEK, Dr Jur, Dr Sc Pol (Vienna),-, DSc (Econ.) (London), Visiting Professor at the University of Salzburg, Austria, 1970-74. Director of the Austrian Institute for Economic Research, 1927-31, and Lecturer in Economics at the University of Vienna, 1929-31. Tooke Professor of Economic Science and Statistics, University of London, 1931-50. Professor of Social and Moral Science, University of Chicago, 1950-62. Professor of Economics, University of Freiburg i.Brg., West Germany, 1962-68. He was awarded the Alfred Nobel Memorial Prize in Economic Sciences in 1974. Created Companion of Honour in 1984.

Professor Hayek's most important publ,ications include Prices and Production (1931), Monetary Theory and the Trade Cycle (1933), The Pure Theory of Capital (1941), The Road to Serfdom (1944), Individualism and Economic Order (1948), The Counter-Revolution of Science (1952), and The Constitution of Liberty (1960).

His latest works are a collection of his writings under the title Studies in Philosophy, Politics and Economics (1967) and Law, Legislation and Liberty (Vol. I: Rules and Order, 1973; Vol. II: The Mirage of Social Justice, 1976; Vol. III: The Political Order ofa Free People, 1979); New Studies in Philosophy, Politics, Economics and the History of Ideas (1978); and The Fatal Conceit (1988). He has also edited several books and has published articles in the Economic Journal, Economica and other journals.

The lEA has published his The Confusion ofLanguage in Political Thought (Occasional Paper 20, 1968), his Wincott Memorial Lecture, Economic Freedom and Representative Government (Occasional Paper 39, 1973), a collection of his writings with a new essay (assembled by Sudha Shenoy), A Tiger by the Tail (Hobart Paperback 4, 1972, Second Edition, 1978), an essay in Verdict on Rent Control (lEA Readings No.7, 1972), Full Employment at Any Price? (Occasional Paper 45, 1975), and Choice in Currency: A Way to Stop Inflation (Occasional Paper 48, 1976).

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'The cause ofwaves ofunemployment is not "capitalism" butgovernments denying enterprise the right to produce good money.'  F.A.H.

First published in Great Britain in 1976 by
The Institute of Economic Affairs
2 Lord North Street
Westminster
London SW1P 3LB

This reissued edition published in 2007 by The Institute of Economic Affairs
in association with Profile Books Ltd

ISBN-10: 0 255 36239 0
ISBN-13: 978 0 255362399

The mission of the Institute of Economic Affairs is to improve public understanding of the fundamental institutions ofa free society, by analysing and expounding the role of markets in solving economic and social problems.

Download Denationalisation of Money by F. A. Hayek

PDF format, 12.2MB, 148Pages.

AUTHOR'S INTRODUCTION

For in every country of the world, I believe, the avarice and injustice of princes and sovereign states abusing the confidence of their subjects, have by degrees diminished the real quality of the metal, which had been originally contained in their coins.
ADAM SMITH
(The Wealth ofNations (1776), I. iv, Glasgowedn., Oxford, 1976, p. 43.)

In my despair about the hopelessness of finding a politically feasible solution to what is technically the simplest possible problem, namely to stop inflation, I threw out in a lecture delivered about a year agol a somewhat startling suggestion, the further pursuit of which has opened quite unexpected new horizons. I could not resist pursuing the idea further, since the task of preventing inflation has always seemed to me to be of the greatest importance, not only because of the harm and suffering major inflations cause, but also because I have long been convinced that even mild inflations ultimately produce the recurring depressions and unemployment which have been a justified grievance against the free enterprise system and must be prevented if a free society is to survive.

The further pursuit ofthe suggestion that government should be deprived of its monopoly of the issue of money opened the most fascinating theoretical vistas and showed the possibility of arrangements which have never been considered. As soon as one succeeds in freeing oneself of the universally but tacitly accepted creed that a country must be supplied by its government with its own distinctive and exclusive currency, all sorts of interesting questions arise which have never been examined.

The result was a foray into a wholly unexplored field. In this short work I can present no more than some discoveries made in the course of a first survey of the terrain. I am of course very much aware that I have only scratched the surface of the complex of new questions and that I am still very far from having solved all the problems which the existence of multiple concurrent currencies would raise. Indeed, I shall have to ask a number of questions to which I do not know the answer; nor can I discuss all the theoretical problems which the explanation of the new situation raises. Much more work will yet have to be done on the subject; but there are already signs that the basic idea has stirred the imagination of others and that there are indeed some younger brains at work on the problem.

The main result at this stage is that the chief blemish of the market order which has been the cause of well-justified reproaches, its susceptibility to recurrent periods of depression and unemployment, is a consequence of the age-old government monopoly of the issue of money. I have now no doubt whatever that private enterprise, if it had not been prevented by government, could and would long ago have provided the public with a choice of currencies, and those that prevailed in the competition would have been essentially stable in value and would have prevented both excessive stimulation of investment and the consequent periods of contraction.

The demand for the freedom of the issue of money will at first, with good reason, appear suspect to many, since in the past such demands have been raised again and again by a long series of cranks with strong inflationist inclinations. From most of the advocates of 'Free Banking' in the early 19th century (and even a substantial section of the advocates of the 'banking principle') to the agitators for a 'Free Money' (Freigeld) Silvio Gesell [22] and the plans of Major C. H. Douglas [13], H. Rittershausen [51] and Henry Meulen [44]-in the 20th, they all agitated for free issue because they wanted more money.

Often a suspicion that the government monopoly was inconsistent with the general principle of freedom of enterprise underlay their argument, but without exception they all believed that the monopoly had led to an undue restriction rather than to an excessive supply of money. They certainly did not recognise that government more often than any private enterprise had provided us with the Schwundgeld (shrinking money) that Silvio Gesell had recommended.

I will here merely add that, to keep to the main subject, I will not allow myself to be drawn into a discussion of the interesting methodological question of how it is possible to say something of significance about circumstances with which we have practically no experience, although this fact throws interesting light on the method of economic theory in general. In conclusion I will merely say that this task has seemed to me important and urgent enough to interrupt for a few weeks the major undertaking to which all my efforts have been devoted for the last few years and the completion of which still demands its concluding third volume.

The reader will, I hope, understand that in these circumstances, and against all my habits, after completing a first draft of the text of the present Paper, I left most ofthe exacting and time-consuming task ofpolishing the exposition and getting it ready for publication to the sympathetic endeavours of Mr Arthur Seldon, the Editorial Director of the Institute of Economic Affairs, whose beneficial care has already made much more readable some ofmy shorter essays published by that Institute, and who has been willing to assume this burden. His are in particular all the helpful headings of the sub-sections and the 'Questions for Discussion' at the end. And the much improved title ofwhat I had intended to call Concurrent Currencies was suggested by the General Director of the Institute,

Mr Ralph Harris. I am profoundly grateful to them for thus making possible the publication of this sketch. It would otherwise probably not have appeared for a long time, since lowe it to the readers of Law) Legislation and Liberty that I should not allow myself to be diverted from completing it by this rather special concern for longer than was necessary to get a somewhat rough outline of my argument on paper.

A special apology is due to those ofmy many friends to whom it will be obvious that, in the course of the last few years when I \vas occupied with wholly different problems, I have not read their publications closely related to the subject of this Paper which would probably have taught me much from which I could have profited in writing it.

Salzburg
30 June, 1976
F. A. HAYEK

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