Monetary and Financial Theory, History, and Policy
A Reading List
Prepared by Mark A. Calabria, James A. Dorn, and George Selgin
Read This First
“The Limits of Monetary Policy,” by James A. Dorn. From the
Cato Handbook for Congress , 193-202. Washington: Cato
What monetary policy can and can’t do in a nutshell, and recommendations for reform.
Basic Monetary Economics
and the Mechanism of Exchange , by William Stanley Jevons.
New York: D. Appleton and Co., 1876.
A classic yet surprisingly relevant introduction to money and other basic monetary institutions.
of Money and Credit , by Ludwig von Mises. New Haven,
Conn.: Yale University Press, 1953.
Perhaps the greatest of all treatises on the subject.
The Theory of Monetary Institutions , by Lawrence H.
White. Malden, Mass.: Blackwell, 1999.
The best work on its subject, with chapters on the gold standard and the theory of competing fiat monies.
The Fluttering Veil: Essays on Monetary Disequilibrium
, by Leland Yeager. Indianapolis: Liberty Fund, 1997.
A collection of Yeager’s best essays on monetary theory and macroeconomics.
U.S. Monetary History
Politics in America from the Revolution until the Civil
War , by Bray Hammond. Princeton: Princeton University
Hammond’s Pulitzer-Prize winning story of banking in the antebellum U.S.
“Wildcat Banking, Banking Panics, and Free Banking in the United
States,” by Gerald P. Dwyer, Jr. Federal Reserve Bank of
Atlanta Economic Review , December 1996: 1-20.
An excellent summary of the United States’ so-called “free banking” era.
A Monetary History
of the United States, 1867-1960 , by Milton Friedman and
Anna Jacobson Schwartz. Princeton: Princeton University Press,
Friedman won his Nobel Prize for other work, but this is the one for which he’s most famous.
Monetary Policy in the United States: An Intellectual and
Institutional History , by Richard H. Timberlake. Chicago:
University of Chicago Press, 1993.
The story of U.S. monetary policy from the nation’s beginning, well-told by one of our greatest monetary economists.
Constitutional Money: A Review of the Supreme Court’s Monetary
Decisions , by Richard H. Timberlake. New York: Cambridge
University Press, 2013.
The best account of the Supreme Court’s (frequently exasperating) role in shaping the U.S. monetary system.
“Has the Fed Been a Failure?,” by George Selgin, William D.
Lastrapes, and Lawrence H. White. Journal of
Macroeconomics 34, 2012: 569-96.
A review of the Fed’s poor performance during its first century.
“The Rise and Fall of the Gold Standard in the United States,”
by George Selgin. Cato Policy Analysis, no. 729, June 20, 2013.
A succinct account of the gold standard’s history in the U.S.
Free Banking and Currency Competition
Denationalisation of Money: The Argument Refined , by
F.A. Hayek. London: Institute of Economic Affairs, 1976.
The book that revived interest in competing currencies and free banking.
The Theory of Free
Banking : Money Supply under Competitive Note
Issue , by George Selgin. Lanham, Md.: Rowman &
Explains how competition among multiple currency-issuing banks constrains and controls money creation.
The Rationale of Central Banking , by Vera Smith.
Indianapolis: Liberty Fund, 1990.
A classic survey, by one of Hayek’s students, of 19th-century debates between proponents of free banking and those of currency monopoly.
Free Banking in Britain: Theory, Experience, and
Debate , 2nd ed., by Lawrence H. White. London: Institute
of Economic Affairs, 2008.
The book that revived interest in the Scottish free-banking system.
Finance: A Reinterpretation of Financial and Monetary
Economics , by Kevin Dowd. New York: St. Martin’s Press,
1996. Now available as a Cato digitalbook.
A treatise on monetary and financial economics, seen from a free-banker’s perspective.
Monetary Rules and Targets
“The Role of
Monetary Policy,” by Milton Friedman. American Economic
Review 58, 1968: 1-17.
A classic statement of the link between money and prices, the impact of monetary disturbances on business fluctuations, and the role of monetary policy in promoting long-run price stability and prosperity.
“Rules and Discretion in Monetary Policy,” by Gerald P. Dwyer.
Federal Reserve Bank of St. Louis Review 75, May/June
An excellent overview of the basic arguments for and against monetary rules.
“Nominal GDP Targeting: A Simple Rule to Improve Fed
Performance,” by Scott Sumner. Cato Journal 34, 2014:
A concise defense of NGDP targeting, by its most well-known exponent.
Less Than Zero: The Case for a Falling Price Level in a Growing
Economy , by George Selgin. London: Institute of Economic
Argues that deflation is perfectly healthy, and should not be prevented by monetary authorities, when it reflects productivity gains.
Alternatives to Fiat Money
The Search for Stable Money , edited by James A. Dorn
and Anna J. Schwartz. Chicago: University of Chicago Press,
Alternatives to discretionary monetary policy and government fiat money.
The Future of Money in the Information Age , edited by
James A. Dorn. Washington: Cato Institute, 1997.
The implications of the information revolution, financial innovation, and globalization for the future of money.
“Synthetic Commodity Money,” by George Selgin. Journal of
Financial Stability, 2014.
Argues that Bitcoin and similar cyber-currencies have characteristics distinct from those of either fiat money or ordinary commodity monies, and that in principle they can be designed so as to be better than either traditional alternative.
Renewing the Search for a Monetary Constitution ,
edited by Lawrence H. White, Victor J. Vanberg and Ekkehard A.
Köhler. Washington: Cato Institute, 2015.
A follow-up to the classic 1962 volume, In Search of a Monetary Constitution , comprising a variety of proposals for achieving a rule-based monetary system.
“Market Discipline Beats Regulatory Discipline,” by John
Allison. Cato Journal 34, 2014: 345-52.
A banker’s perspective on why market discipline is more timely and effective in regulating financial markets and generating financial stability than government regulation.
“How Should Financial Markets Be Regulated?,” by Kevin Dowd and
Martin Hutchinson . Cato Journal 34, 2014: 353-88.
Offers a brief history and overview of U.S. financial regulation, as well as an analysis of the historical and theoretical basis for such regulation.
“Run, Run, Run: Was Financial Crisis Panic over Institution Runs
Justified?,” by Vern McKinley. Cato Institute Policy Analysis
no. 747, April 10, 2014.
Finds that one of the central justifications for financial regulation and a lender of last resort — the possibility of bank “runs” or panics — is grossly exaggerated, and that financial failures are generally issues of solvency, not liquidity.
Gone Mad: Regulatory Risk Modeling by the Federal Reserve,” by
Kevin Dowd. Cato Policy Analysis, no. 754, September 3, 2014.
How “high tech” approaches contributed to the subprime crisis, and are likely to contribute to future ones if regulators have their way.
“Incentive-Robust Financial Reform,” by Charles Calomiris.
Cato Journal 31, 2011: 561-89.
A plan for financial reform building upon simple rules that incorporate the actual incentives faced by financial market participants.
Street: A Description of the Money Market, by Walter
Bagehot. London: Henry S. King and Co., 1973.
The classic, if often misunderstood, diagnosis of British monetary crises, and the Bank of England’s part in them.
“Legal Restrictions, Financial Weakening, and the Lender of Last
Resort,” by George Selgin. Cato Journal 9, 1989:
Argues that misguided government regulations are the ultimate cause of banking crises.
Design: The Political Origins of Banking Crises and Scarce
Credit , by Charles W. Calomiris and Stephen H. Haber.
Princeton: Princeton University Press, 2014.
Another, much more detailed look at governments’ role in making banking systems fragile and crisis-prone.
Financial Crisis: Why the Conventional Wisdom Has It All
Wrong,” by Richard Kovacevich. Cato Journal 34, 2014:
A banker whose bank avoided it dispels common myths about both the causes of the subprime crisis and the steps needed to avoid similar crises in the future.
and Government: The Next 30 Years , edited by James A.
Dorn. Washington: Cato Institute, 2013.
The proceedings of Cato’s 30th Annual Monetary Conference, with contributions that look forward to a better post-subprime crisis monetary system.
The Financial Crisis and the Free Market Cure , by John
Allison. United States: McGraw-Hill Companies, 2013.
Another excellent work on the subprime boom and bust by a competent banker who kept out of it — and who says the Fed ought to have stayed out as well.