The Experience of Free Banking.

• Author: Garrison, Roger W.

Eight economists exploring on both sides of the Atlantic and both north and south of the equator have unearthed more episodes of free banking and near-free banking than even specialists in the field would have thought existed. Nine of the book's eleven chapters are organized on a chapter-per-country basis and are arranged in alphabetical order by country. Editor/contributor Kevin Dowd deals in separate chapters with free banking in Australia and in the United States. In between these two countries, alphabetically speaking, are free-banking episodes in Canada (Kurt Schuler), Colombia (Adolfo Meisel), Foochow, China (George A. Selgin), France (Philippe Nataf), Ireland (Howard Bodenhorn), Scotland (Lawrence H. White), and Switzerland (Ernst Juerg Weber). Except for White's path-breaking treatment of free banking in Scotland before 1844, reprinted from White |2~, the contributions to this volume are original. A short introductory chapter by Dowd is followed by a 40-page overview chapter, in which Schuler identifies the evolutionary origins of free banking and shows that competition among banks involved a good deal of cooperation in the form of clearing arrangements. He compares the performance of free banking with that of central banking and employs the case-study method to deal with three causes for the demise of free banking: theoretical debate underlay the demise of free banking in Britain; considerations of seigniorage (i.e., monopoly rent-seeking by government) accounted for the end of free banking in China, France, and Sweden; and efforts to deal with economic crises put an end to free banking in the British Colonies, France, Germany, and the United States. Schuler's overview ends with a tabular presentation that spans six pages. For each of some sixty different episodes, the table indicates the years that free banking prevailed as well as the year that central banking began, lists the particular restrictions that applied during the episode, suggests the reason for free banking's demise, and cites source material. The information density in these half dozen pages is remarkably high. As its title indicates, this book is about the experience with--as opposed to the theory of--free banking. But the opening chapters provide enough in the way of carefully thought out definitions and hints about the corresponding theory to make the accounts of the actual episodes of free banking generally understandable. The contributors do not use the term...