The last time that inflation was really out of control in the UK, back in the 1970s, the Nobel prize-winning economist Friedrich Hayek wrote a lovely little pamphlet for the Institute of Economic Affairs. It was called “The Denationalisation of Money” (now available as a free download from the IEA) and in it he argued that the provision of private currency would be more likely to result in sound money than state currency because the issuers would have to compete in order to keep the value of their currency up. Now that inflation is beginning to creep up once again, we are beginning to see more discussion of alternative arrangements, and this time we are in a technological environment that is more than capable of delivering them. In the 1970s, the idea of walking into a shop and paying with British Leyland‘s money would have appeared ludicrous. The costs of issuing the notes and coins, managing them in circulation, handling them at point of sale (retailers would have needed enormous cash registers to store all of the different kinds of money) and mentally calculating on the exchange rates were just too great. It was an interesting thought experiment, but it was difficult to see it as anything more.
In addition to the PC, smart cards, biometrics, the Internet and everything else, there is a specific new technology that actually makes Hayek’s proposal eminently practical, and that is the mobile phone. Suppose the competing money issuing institutions did not actually have to issue expensive notes and coins? Suppose the new currency is made from choices on a mobile phone menu rather than banknotes with different pictures on them? The incredible success of Safaricom’s M-PESA in Kenya has demonstrated clearly that mobile phones are a viable alternative to physical cash in developing countries and in Japan and elsewhere the combination of mobile and contactless technologies promises the same. We are not far from 100% mobile penetration: might this be a good time to rethink money for the coming mobile age?
This is what I’ll be talking about at LIFT08 in Korea next week: who is unhappy about the way that money works, and if technology is giving us the opportunity to re-implement money for the modern age then what should the requirement specification be? What do we actually want money to do?
These opinions are my own (I think) and presented solely in my capacity as an interested member of the general public [posted with ecto]