Money as an Institution: Rule versus Evolved Practice? Analysis of Multiple Currencies in Argentina

Abstract

Monetary policies and adjustments during a financial crisis depend on policy-makers’ conceptions on what money is and how it works. There is sufficient consensus among scholars that money is an institution created within the economic system and is in line with other institutions that regulate economic action. However, there are different understandings of what institutions are and how they operate, and these understandings imply differences in terms of monetary enforcement, resilience, responsiveness and stability. This paper discusses the two main approaches that conceptualise institutions as rules and as practices presenting an empirically informed discussion of money as an institution drawing on these insights. It grounds the analysis on the empirical case of Argentina as a monetary laboratory and the plurality of currencies that circulate in its economy. The study argues that while the official currency of Argentina corresponds to the institutions as rules approach, the adoption of the U.S. dollar into a bimonetary economy evolved as equilibrium. In between, the massive community currency systems that rose and declined during the economic meltdown between 1998 and 2002 were a hybrid institution that combined rules and practice. All three of them show various degrees of resilience and stability.

Design of Strategies for the Implementation and Management of a Complementary Monetary System Using the SWOT-AHP Methodology

“…On the other hand, it is interesting to note the following: a CSMS is not designed to either compete with fiat money or for the sole purpose of articulating a monetary alternative in times of economic recession. In this sense, Gawthorpe [24] and Gómez [84] conclude that, in the face of moments of economic growth, the use of complementary currencies is lower. Gómez [84] even claimed that economic growth caused the various Argentine initiatives around barter markets to collapse, which arose in the face of the economic crisis endured by the Latin American country in the first decade of the 21st century.…”

“…On the other hand, CSMSs can make an important contribution to softening the effects of a monetary crisis, especially in those countries with emerging economies [84]. In this regard, WIR-a CMS in Switzerland-may be a good example of this.…”

Idiosyncrasies of Money: 21st Century Evolution of Money

“…While it is clear that institutions have very different views on what they are and how they work, these views of the working of institutions mean significant differences in monetary enforcement, responsiveness, and stability. Gómez (2019) addresses empirical considerations about money's role in institutional frameworks in discussing institutions' rules and practices. An empirical case study grounds his analysis of Argentina's and the plurality of its currencies in the economy.…”

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“…Without involvement of the science community, new systems might be less effective, robust, or resilient. Even when grassroots-grown systems dramatically boom, they can also dramatically bust, as happened in the early 2000s with the Trueque, a community currency system in Argentina [110]. Better design and more thorough testing might have helped to prevent its fall.…”