Abstract
The revival of interest in free banking has made clear how important it is to re-evaluate our monetary history. One of the reasons why so many economists support state intervention in the monetary system is that they believe that history shows that monetary laissez-faire is inherently unstable, and that central banking evolved to counter that instability.1 It is now becoming increasingly apparent that the first view is unsupportable, and that the relatively unregulated banking systems of the past have a good record of stability.2 The evidence suggests, in fact, that they have a superior record to contemporary or later banking systems which were more heavily regulated. A question then arises: if monetary laissez-faire is not inherently unstable, it must follow that central banking could not have evolved to counter the market’s inherent instability, and we are left wondering why central banking did evolve.
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© 1991 Forrest Capie and Geoffrey E. Wood
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Dowd, K. (1991). The Evolution of Central Banking in England, 1821–90. In: Capie, F., Wood, G.E. (eds) Unregulated Banking. Palgrave Macmillan, London. https://doi.org/10.1007/978-1-349-11398-9_5
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