Internationally Ideal Money: The Re-Solution of Nashian and Hayekian Economic Theory
John Nash's Ideal Money ends with this side note about how he learned of the similarities between his own insights on money and Freidrich Hayek's views:
The talk text, just for the “ideal money” topic, originally derives from my outline for the lectures given at various specific locations of the “European School of Economics” in Italy during October 1997. Subsequent to that time, after consulting with some of the economics faculty at Princeton, I learned of the work and publications of Freidrich von Hayek. I must say that my thinking is apparently quite parallel to his thinking in relation to money and particularly with regard to the non-typical viewpoint in relation to the functions of the authorities which in recent times have been the sources of currencies (earlier “coinage”).)
In Hayek's essay Denationalisation of Money he extends a theory based on the premise of the abolition on government's monopoly on the supply of money through central banking practices. With the introduction of private money a type of evolution cause by the competitive environment would force governments to create quality money against their own selfish interest:
The purpose of this scheme is to impose upon existing monetary and financial agencies a very much needed discipline by making it impossible for any of them, or for any length of time, to issues a kind of money substantially less reliable and useful than the money of any other. As soon as the public became familiar with the new possibilities, any deviations from the straight path of providing an honest money would at once lead to the rapid displacement of the offending currency by others. And the individual countries, being deprived of the various dodges by which they are now able temporarily to conceal the effects of their actions by 'protecting' their currency, would be constrained to keep the value of their currencies tolerably stable.
John Nash also sees this scenario as inevitable, and he too paints a future in which the quality of money is ensured through competition:
...there COULD be introduced, for example, a similar international currency for the Islamic world or for South Asia, or for South America, or her or there.
...what is more significant from an internationally oriented viewpoint, the various currencies would have rates of exchange so that they could be realistically compared in terms of their actual values.
So here is the possibility of “asymptotically 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, like now the euro, the dollar, the yen, the pound, the swiss franc, the swedish kronor, etc. can be viewed with critical eyes by their users and by those who may have the option of whether or not or how to use one of them. This can lead to pressure for good quality and consequently for a lessened rate of inflationary depreciation in value.
Hayek also considers the limit of an evolution of the quality of money:
I will readily admit that such a provisional solution (on which the experimentation of competition might gradually improve), though giving us an infinitely better money and much more general economic stability than we have ever had, leaves open various questions to which I have no ready answer. But it seems to meet the most urgent needs much better than any prospects that seemed to exist while one did not contemplate the abolition of the monopoly of the issue of money and the free admission of competition into the business of providing currency.
Such a limit is exactly referred to as “Ideal”:
An ideal is a concept or standard of perfection, existing merely as an image in the mind
Idealness, whether by Nash's definition or Hayek's explanation, is to be approached, yet our understanding of the purpose and power of a technology that approaches ideal money CAN be reached through meditation and conceptualization.
Nash and Hayek describe an outcome based on a technology we have had for 7 years now, which is the exact time our governments no longer held the monopoly on money printing.