The Age of Central Banks
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The Age of Central Banks

Curzio Giannini

Curzio Giannini’s history of the evolution of central banks illustrates how the most relevant institutional developments have taken place at times of widespread confidence crises and in response to deflationary pressures. The eminent and highly-renowned author provides an analytical perspective to study the evolution of central banking as an endogenous response to crisis and to the ever increasing needs of economic growth. The key argument of the analysis is that crucial innovations in the payment technology (from the invention of coinage to the development of electronic money) could not have taken place without an institution – i.e. the central bank - that could preserve confidence in the instruments used as money. According to Curzio Giannini’s ‘neo-institutionalist’ methodological approach, social institutions are, in fact, essential in the coordination of individual decisions as they minimize transaction costs, overcome information asymmetries and deal with incomplete contracts.
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Chapter 1: Money between State and Market: The Concept of Payment Technology

Curzio Giannini

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1. Money between state and market: the concept of payment technology 1.1 INTRODUCTION The origins of money will probably remain forever wrapped in mystery. Scores of historians, anthropologists and archaeologists have tried to solve the problem, but it is not easy to trace a phenomenon that pre-dates the invention of writing and thus any documental evidence of human thinking. But why should such ignorance be of any concern for economists? After all, we do not need to know when, why or by whom the notion of paid work was introduced in order to understand the labour market. Nor do we need to go back to the first time the budget of some ancient monarch failed to balance in order to understand the meaning of sound public finances. Where money is concerned, however, many people believe that things are not so simple. John Hicks, probably the greatest expert on monetary matters of the twentieth century, was among them: One of the chief things which monetary theory ought to explain is the evolution of money. If we can reduce the main lines of that evolution to a logical pattern, we shall not only have thrown light upon history, we shall have deepened our understanding of money, even modern money, itself.1 Hicks does not tell us why this is so. It is interesting to note, though, that the passage quoted is really a palinode. Thirty years earlier, Hicks himself, under the battle-cry of ‘let’s spread the marginalist revolution to money’, called on the...

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