Ideal money

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John Forbes Nash, Jr.

Ideal Money is a theoretical notion promulgated by John Nash (Nobel Laureate in Economics) to stabilize international currencies. It is a solution to the Triffin dilemma-the conflict of economic interests between the short-term domestic and long-term international objectives when a currency used in a country is also serving as world reserve currency.

Nash gave various lectures and written discourses on the subject he called Ideal Money.[1][2] The first talk was given in 1995 (one year after Nash won the Nobel Prize for economics for his work on equilibrium theory nearly 50 years prior).[3] Nash spent 20 years giving talks, in many different nations around the world, about how Ideal Money could be brought about internationally.

Nash said in an interview the basic idea for Ideal Money came to him in the late 1950s and early 1960s at a time when he fled the US to Europe in order to try to renounce his US citizenship and exchange his USD for the Swiss Franc (which he believed to be superior in quality from a perspective he describes in Ideal Money).[4]

Definition[edit]

Nash defines his concept of Ideal Money as:

....money intrinsically not subject to inflation...[5]

ICPI-Industrial Consumption Price Index[edit]

In pursuit of a possible apolitical basis for stable value Nash created a concept he calls an ICPI. The ICPI is effectively a basket of optimally chosen commodity prices:

The ultimately launched concept of "Ideal Money" became possible when I conceived of a practical basis for a standardization of the comparison of the value of the currency with an appropriate standard or ideal. And the key to that was the idea of an ICPI or (international) "Industrial Consumption Price Index".[6]

This statistic could be calculated from the international prices of commodities such as copper, silver, tungsten, and so forth that are used in industrial activities.

Asymptotically ideal money[edit]

In an interview with Greek ex-finance minister Yanis Varoufakis Nash explained that the role of money has changed and evolves:

...money plays constantly evolving role, despite the continuity from one era to the next. Flux and Continuity. Presently, economists have focused on the theoretical problem of replacing paper money by plastic of electronic money, as well as on the repercussion of such a replacement.[7]

Nash's narration of the evolution of ideal money through the competition of respective national fiat and centrally banked currencies starts with the introduction of a possible international money of good quality:

In the near future there may be a smaller number of major currencies used in the world and these may stand in competitive relations among themselves. There is now the "euro" and the inflationary tradition of the Italian lira seems to be past history now. And there COULD be introduced, for example, a similar international currency for the Islamic world, or for South Asia, or for South America, or here or there.

Nash's death[edit]

Nash died suddenly in a taxi cab accident involving him and his wife.[8] On the way home from receiving the Abel prize,[9] Nash and his wife were forced to take a taxi cab from the airport when their limousine never arrived. They were both thrown from the cab when the driver lost control and neither were wearing seat belts as it was reported the seat belts weren't working.

The Nashes died on the New Jersey Turnpike which is coincidental with the abstract opening of the first published version of Ideal Money:

Money can be recognized as a technological development comparable to the wheel and of similar antiquity. Among the more recent developments in the technology that facilitates transfer of utility (in the sense of game theory) are systems like those of EZ Pass, by means of which vehicles traversing toll bridges or toll highways can pay, their toll fees without stopping for the attention of human personnel manning the toll booths.[10]

Ideal money as fiat[edit]

The implementation of centrally banked digital currencies, such as many nations and central banks are studying and testing,[11] might also give rise to a possibility for the implementation of Ideal Money via a digitally secured peg to a basket of digitally based nationally currencies.

References[edit]

  1. ^ http://www.mediatheque.lindau-nobel.org/videos/31344/ideal-money-and-the-motivation-of-savings-and-thrift-2011
  2. ^ Nash, John. "Ideal Money Lecture".
  3. ^ Nash, John. "Ideal Money lecture 1995".
  4. ^ "Food For Thought With John Nash".
  5. ^ "Fermat's Library | Ideal Money Version 2 annotated/explained version". Fermat's Library. Retrieved 2020-03-13.
  6. ^ Nash, John. "Asymptotically Ideal Money".
  7. ^ Varoufakis, Yanis. "In conversation with John Nash Jnr on Ideal Money".
  8. ^ "John Nash, mathematician portrayed in A Beautiful Mind, dies in taxi crash at 86".
  9. ^ "John F. Nash, Jr. and his wife Alicia killed in car accident".
  10. ^ Nash, John (July 2002). "Ideal Money-Southern Economic Journal". JSTOR 1061553. Cite journal requires |journal= (help)
  11. ^ "Central Bank Digital Currency: Motivations and Implications" (PDF).

External links[edit]