Monetary History and Law
My historical work focuses on laws of money, especially legal tender, a concept which is poorly understood and frequently ignored.

In 1971 gold was finally taken out of the monetary system. The entire world settled for the first time on intrinsically useless, inconvertible, unbacked legal tender money. The notions of a government providing gold for notes or punishing sellers who reject its notes seem entirely alien to young generations in free countries, even though these were common practices in earlier times. This modern type of money was born in Massachusetts in 1690. From there it spread to the rest of the world, but its pro-inflation bias led to its repeated suppression between wars, until 1971. In this project I examine how the legal tender law - originally used to solve contractual disputes - came to be the anchor of all modern monetary systems.


Colonial America had an incredible variety of types of money. Corn, wheat, barley, tobacco, rice, sugar, Indian seashell money, beaver fur, fish, whalebone, bullets, silver plate, Spanish coin, English coin, colonial coin, and banknotes preceded the 1690 innovation. In my book How Americans Invented Modern Money, 1607-1692 [advance contract, University of Chicago Press] I will explain why this happened, and why of all colonies Massachusetts alone managed to go beyond primitive money. It had the most specatcular monetary evolution in history, replicating in 60 years what the world did in 6000 years, and then outdid everyone else. My theory, in a nutshell, is that everything was caused, directly or indirectly, by English regulation across the board.

A preview in Hebrew is in Zmanim 129, March 2015, 38-49: כיצד המציאו האמריקנים את הכסף המודרני

A preview which is included in the wider context of the development of paper money in the period 1450-1850 from curiosity to global dominance, is in the chapter "Paper Money" in the Routledge 2014 handbook The Atlantic Worldedited by D'Marris D. Coffman, Adrian Leonard, and William O'Reilly [Chapter 26, pp. 171-190]. 

Here are some pieces of this project in the form of articles:
- Backing paper money with land was the hottest financial idea of the late 17th century in England and its colonies. To understand why it was not executed in Massachusetts in 1690 when that colony needed to print money, it is necessary to understand the failed Boston land bank of the 1680s. Imported from England in 1685, it was myteriously aborted in 1688 at an advanced stage. In Why was America's First Bank Aborted? [Journal of Economic History 71(1), March 2011, 211-22] I show that this happened because a new royal governor invalidated all the local land titles. This episode has larger ramifications on the debate regarding property rights under dictatorship (see my Political Economy page).
- One of the key contributors to the 1690 Massachusetts invention was the idea of issuing paper money at a discretionary amount without having the proper physical backing at hand in real time. In The Inventions and Diffusion of Hyperinflatable Currency I examine various claims to the origin of this idea and the transmission of information about monetary innovation between countries and across time. I find that the money improvised from playing cards in Canada in 1685 was probably an original re-invention that inspired Massachusetts. The Canadian money was supported by a credible promise of future convertibility and by forcing sellers to accept it, but these were not feasible solutions in Massachusetts of 1690. 
- In The Massachusetts Paper Money of 1690 [Journal of Economic History 69(4), December 2009, 1092-1106] I put these and other pieces together. In order to appease the English king in a turbulent period of constitutional uncertainty, the currency could not be legally supported in any way other than legal tender, thus leading to a remarkable monetary innovation. I also found that the most cited negative evidence on that money's performance was forged by the colony's nemesis. 
In this project I examine the plethora of methods used throughout history to support the circulation of intrinsically useless currency. I focus especially on Legal Tender. One reason that legal tender laws have been mostly ignored in the literature is the existence of myths about objects used as money with neither legal support nor intrinsic value (this is what economists - but not legal scholars - call "fiat money"). In The Myths of "Fiat Money" I evaluate all such claims regarding traditional societies. I find them to be baseless. An excerpt, relating to the most famous examples (seashells and stone money), is Famous Myths of "Fiat Money" [Journal of Money, Credit, and Banking 37(5), October 2005, 957-967]. For a theoretical model of legal tender see my Monetary Theory page.

Many countriesused to make rejection of money a criminal offense. Most current laws of this type originate in the legislation of the first French Republic which had hyperinflation in 1793. In Forced Money: Legal Development of a Criminal Economic Rule [Comparative Legal History - published online Nov. 2016] I show why this law was enacted and then copied by other countries due to combinations of crises, authoritarianism, and socialism


In 1752 David Hume published economic essays which have had a major impact on monetary theory to this day. Surprisingly, he almost completely ignored the pathbreaking massive experiment with unbacked paper money that was conducted at the time in the British American colonies. In Why did Hume Neglect American Paper Money? I attribute this to contemporary political events, the goal of his work, his treatment of laws, and his general dislike of America at that point in his life.


In the year 1000 all the world money supply was based on commodities. In the year 2000 none of the world money supply was based on commodities. How did this change happen and why? At a conference on the history and law of money, Richard Sylla provided some answers: “Political Economy of Supplying Money to a Growing Economy: Monetary Regimes and the Search for an Anchor to Stabilize the Value of Money” [Theoretical Inquiries in Law 11(1), 2010)]. I commented on the paper in the accompanying Theoretical Inquiries in Law Forum.