THE DISREGARD FOR CURRENCY BOARD REALITIES

Abstract

“someone who sees something happen and wonders if it would work in theory ” (quoted in D’Souza 1997: 111). As is so often the case, Reagan’s quip contains more than a kernel of truth. Indeed, D. N. McCloskey devotes an entire chapter in a recent book to “The Futility of Blackboard Economics ” and a critique of economists ’ obsessive pursuit of economic theory (McCloskey 1996). And she is not alone. Ronald Coase (1994) and Peter Bauer (1976), to name but two dis-tinguished economists, have spent most of their professional lives elaborating on the essence of Reagan’s remark and the cul-de-sac that it has led economics into. Errors of Omission and Commission Not surprisingly, most economists who write about Currency Board Systems (CBSs) have been unable to shake off bad habits and the type of scientism alluded to by Reagan. In consequence, the burgeoning literature on CBSs often suffers from a reckless disregard for reality. Much like the Bourbons after the French Revolution, most of those who toil in the CBS cottage industry have learned nothing and for-gotten nothing. By eschewing history and contemporary “facts on the ground, ” their works are largely devoid of information about how CBSs have actually operated and performed in practice. Accordingly, their theoretical speculations are, at best, misleading. Indeed, they are typically little more than musings about problems that could be (but have not been) created by CBSs. In what follows, I attempt to

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