ABSTRACT
The evolution of simple monetary exchange and economic calculation stimulates and necessitates the increased use of money and provides incentives for further evolution of monetary institutions. Banks, demand deposits, currency, clearinghouses, and other extensions of financial industry come into being and evolve during market process of economic development. The increased complexity of the creative development of money requires coordination through more advanced monetary institutions. To be able to maintain a high degree of economic order, a properly functioning and sufficiently complex set of monetary institutions is necessary. The evolution of single bank involves an increasing substitution of bank money for commodity money, allowing the bank to economize on reserve holdings and increase its credit-creating power. The unhampered evolution of monetary institutions allows consumers and bankers to take full advantage of all of the benefits associated with brand names. Free banking permits the development of institutions that allow social actors to make use of necessarily fragmented and uncertain knowledge of others.
