Money as meta-rule: Buchanan’s constitutional economics as a foundation for monetary stability

Abstract

This paper explores James Buchanan’s contributions to monetary economics and argues these contributions form the foundation of a robust monetary economics paradigm. While often not recognized for his contributions to monetary economics, Buchanan’s scholarship offers important insights for current debates, especially the renewed interest in narrow banking in the wake of the financial crisis. We argue that the post-2007 crisis milieu creates a unique opportunity to recognize, as Buchanan did, the vital role that money plays in the market as the ‘grammar of commerce.’ That recognition makes the need for more fundamental reform of our monetary regimes at the constitutional level more apparent, making Buchanan’s work on monetary constitutions more relevant than ever before. We then discuss how adopting Buchanan’s monetary framework can improve both monetary scholarship and institutions.