The Denationalization of Money

1976 Friedrich Hayek book

The Denationalization of Money is a book written by Friedrich Hayek, and published in 1976, in which he advocated the establishment of competitively issued private moneys. In 1978 Hayek published a revised and enlarged edition entitled Denationalization of Money: The Argument Refined, where he speculated that rather than entertaining an unmanageable number of currencies, markets would converge on one or only a limited number of monetary standards, on which institutions would base the issue of their notes.


  • I do not think it is an exaggeration to say that history is largely a history of inflation, usually inflations engineered by governments for the gain of governments.
  • I fear that since ‘Keynesian’ propaganda has filtered through to the masses, has made inflation respectable and provided agitators with arguments which the professional politicians are unable to refute, the only way to avoid being driven by continuing inflation into a controlled and directed economy, and therefore ultimately in order to save civilisation, will be to deprive governments of their power over the supply of money.

Quotes about The Denationalization of Money

  • Hayek’s later monetary work constitutes some of his most creative practical policy suggestions. His ideas of competing and private currencies may come into existence during coming years for technological reasons.
    • Alan Ebenstein, Hayek's Journey: The Mind of Friedrich Hayek (2003), Introduction
  • Currency competition and free banking might increase the efficiency of the financial system, and bring some small triangle welfare gains. But the key question is whether their adoption would improve macroeconomic performance. Even though Salin argues (p. 281) that ‘the best system is that which produces the least inflation’, fluctuations in output are also expensive.
    Hayek states that the adoption of his proposal would end recessions. There is absolutely no reason to believe that. Nineteenth century history is evidence that free banking and currency issue, in the wrong legal and regulatory framework, can produce rather than reduce instability. The proponents of free banking and currency issue in this volume do not go much beyond a general belief in competition in justifying their views; they have certainly not explored the necessary legal and regulatory environment in any detail.
    • Stanley Fischer, "Friedman versus Hayek on Private Money: Review Essay" (1986)
  • I approve of Professor Hayek’s proposal to remove restrictions on the issuance of private moneys to compete with government moneys. But I do not share his belief about the outcome. Private moneys now exist—traveler’s and cashier’s checks, bank deposits, money orders, and various forms of bank drafts and negotiable instruments. But these are almost all claims on a specified number of units of government currency (of dollars or pounds or francs or marks). Currently, they are subject to government regulation and control. But even if such regulations and controls were entirely eliminated, the advantage of a single national currency unit buttressed by long tradition will, I suspect, serve to prevent any other type of private currency unit from seriously challenging the dominant government currency, and this despite the high degree of monetary variability many countries have experienced over recent decades.
  • The element of paradox arises particularly with respect to the views of Hayek [see especially Hayek (1979, vol. 3)]. His latest works have been devoted to explaining how gradual cultural evolution - a widespread invisible hand process - produces institutions and social arrangements that are far superior to those that are deliberately constructed by explicit human design. Yet he recommends in his recent publications on competitive currencies replacing the results of such an invisible hand process by a deliberate construct - the introduction of currency competition.
    This paradox affects us all. On the one hand, we are observers of the forces shaping society; on the other, we are participants and want ourselves to shape society.
    • Milton Friedman and Anna J. Schwartz, "Has Government Any Role in Money?" (1986)
  • To be specific: take Hayek's idea of a privatization of money, which aims to deprive the production of money from the central bank. Let us imagine that the European Union or the United States would actually dare to conduct such an experiment. What would be the consequence? The Chinese would be laughing up their sleeves – the renminbi would become the world currency. The world is not simply a textbook. Towards the end, Hayek was not free from liberal utopianism.

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Friedrich Hayek
Concepts and career Business cycle theory · Dispersed knowledge · Extended order · Spontaneous order
Books Prices and Production (1931) · The Road to Serfdom (1944) · Individualism and Economic Order (1948) · The Counter-Revolution of Science (1952) · The Sensory Order (1952) · The Constitution of Liberty (1960) · Studies in Philosophy, Politics and Economics (1967) · Law, Legislation and Liberty (1973) · The Denationalization of Money (1975) · New Studies in Philosophy, Politics, Economics and the History of Ideas (1978) · The Fatal Conceit (1988)
Notable essays "The Use of Knowledge in Society" (1945) · "Why I Am Not a Conservative" (1960) · "The Pretence of Knowledge" (1974)
Commentators Alan O. Ebenstein · Bruce Caldwell
Other topics On evolution · On dictatorship · On John Maynard Keynes