What is “Ideal Money?”

Some 40+ years ago John Nash revolutionized our global economy and how we think of many other types of systems across a vast array of different fields of sciences and academic subjects. It took decades until the extent of his findings came to light, and even longer until he was given Nobel recognition for them (see video biography). Recently (perhaps over the last 10+ years), he has been giving lectures on seemingly every continent in the world, speaking about a new concept of money. In the light of today’s new cryptographic money technology, it might be pertinent (and interesting) to take a look at Nash’s proposal to see if we can have any insights on the possible future of money. Below is the author’s understanding of the lecture in relation to today’s technological advance (Ideal Money pdf).

The Anti-Keynesian Argument

The general concept behind Ideal money seems to be that the Keynesian system of economics is really a type of inherently bad economics:

So I wish to present the argument that various interests and groups, notably including “Keynesian” economists, have sold to the public a “quasi-doctrine” which teaches, in effect, that “less is more” or that (in other words) “bad money is better than good money”.

The Interesting History of Money

The Lecture Ideal money opens:

The special commodity or medium that we call money has a long and interesting history. And since we are so dependent on our use of it and so much controlled and motivated by the wish to have more of it or not to lose what we have we may become irrational in thinking about it and fail to be able to reason about it like a bout a technology, such as a radio, to be used more or less efficiently.

Nash doesn’t begin to explain the interesting history but thankfully we have Nick Szabo for this http://nakamotoinstitute.org/shelling-out/

The history Szabo writes out seems pertinent as his article outlines a key difference in the way we have viewed money in our recent past(retweeted by Szabo):

Nash highlights a similar paradigm:

Although money itself is merely an artifact of practical usefulness in human societies and/or civilizations, there are some traditional or popular views associating money with sin or immorality or unethical or unjust behavior.

What is a Keynesian?

To clear any confusion, Nash gives a clear explanation of the type of economic thinking he wishes to refute:

Let us define “Keynesian” to be descriptive of a “school of thought”…more specifically, a “Keynesian” would favour the existence of a “manipulative” state establishment of a central bank..”

We might further understand the creator of the Keynesian system by listening to F A Hayek’s thoughts on Keynes (Nash and Szabo are both well spoken fans of Hayek’s work)

A few quotes from Hayek on Keynes from the above video:

A man with a great many ideas who knew very little economics


As a brain he was one of the most intelligent and most original thinkers I have known but economics was just a sideline for him


He was very shaky even on the theory of international trade

The Keynesian system of economics is important for Nash to define since it was this system created to print money in order to target inflation that gave him the inspiration for what might become ideal money:

It was the observation of a new “line” that has become popular with those responsible for “central banking “ function relation to nation currencies that gave us the idea for the study of “asymptotically ideal” money.

He elaborates on this realization:

…speaking of “inflation targeting” these responsible official are effectively confessing…that it is indeed after all possible to control inflation by controlling the supply of money.

USA, Canada, Australia, and New Zealand are given as notable examples.

He also alludes to the future (which might mean the present day), and points out:

In there near future there may be a smaller number of major currencies used on the world and they may stand in competitive relations amount themselves.

The Euro is given as an example, although Nash also suggests a few new arbitrary currencies that might arise for places such as the Islamic world or South Asia.

What is Ideal Money?

Our observation, based on thinking in terms of “the long term” rather than in terms of “short range expediency”, was simply that there is no ideal rate of inflation that should be selected and chosen as the target but rather the the ideal concept would necessary be that of a zero rate for what is called inflation.

Wiki on Ideal Money:

Ideal Money is a theoretical notion promulgated by John Nash, to stabilize international currencies. It is a solution to the Triffin dilemma.
He proposed that international exchange rates be fixed by pegging the value of each currency to a standardized basket of commodities, called the industrial consumption price index. Such a policy would curtail the ability of central banks to make monetary policy.

Nash gives a few more important details:

…”ideal money” currencies could be arranged for by using linkage to an appropriate index of the prices of internationally traded commodities.

He cites silver and gold as examples of international traded commodities,
and goes on to explain:

This variety of money would be intrinsically free of “inflationary decadence” similarly to how money would be free from that on a true “gold standard…

But more specifically:

…the proposed basis for that was not the proposal of a linkage to gold.

Nash argues that given these currencies as options with an officially recognized inflation status in terms of the domestic index of costs, the users might be able to demand a better quality of them:

And so the various currencies managed with “inflation targeting” would be comparable by users or observes who would be able to form opinions about the quality of the currencies.

What is Asymptotically Ideal Money?

Asymptotically ideal money seems to be an implementation process that leads to what he calls ideal money:

Starting with the idea of value stabilization in relation to a domestic price index associated with the territory of one state, beyond that there is the natural and logical concept of internationally based value comparisons. The currencies being compared…can be viewed with critical eyes by their users…

The significance being:

This can lead to pressure for good quality and consequently for a lessened rate of inflationary depreciation in value.

It seems he is saying that if the peoples could properly evaluate different currencies AND had the option to trade in and out of these currencies, the market effect would be to force governments reconsider devaluing and destabilizing them.

Politics and Adoption of Ideal Money

Nash gives two examples in which countries are given an option to vote to adopt a new currency and remarks that:

…it cannot be irrelevant whether or not the future quality of a currency is really assured or whether instead that it depends on the shifting sands of political decisions or the possibly arbitrary actions of a bureaucracy of officials

It seems that the much needed currency that could be used as the baseline to evaluate all currencies, is conveniently out of reach for the voting population and is greatly dependent on the policy controllers.

This is further emphasized:

We can legitimately wonder how the speediness of its adoption or delays in its’ adoption might affect the polices operating to control the actual exchange value of the Euro. The constitutional structure of the authority behind the euro is of the “paper money” character in that nothing is really guaranteed as far as the value of the euro is concerned.

Oddly enough he adds:

But this is typical of all currencies used on the world nowadays

Predictions of the End of the Keynesian Period and the Beginning of a Political (Re-)Evolution

After a very lengthy and seemingly complex and cryptic argument Nash finishes by reiterating the damaging effects of the Keynesian system:

The Keynesians implicitly always have the argument that some good managers can do things of beneficial value, operating with the treasury and the central bank…I see this as analogous how the “Bolshevik Communists” were claiming to provide something much better than the “Bourgeois democracy”.

Further burying the ideology:

…while they have claimed to be operating for high and noble objective of general welfare what is clearly true is that they have made it easier for government to “print money”.

His closing statement is seemingly a big one:

And this parallel makes it seem not implausible that a process of political evolution might lead to the expectation on the part of the citizens in the “great democracies” that they should be better situated to be able to understand whatever will be the monetary polices which, indeed, are typically of great importance to citizens who may have alternative options for where to place their “savings”.

And indeed thanks to the anonymous Satoshi Nakamoto we do in fact have that option!


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