ABSTRACT
Having established in Chapter 6 that the equilibrium quantity of money, the equilibrium interest rate, the equilibrium bank reserve ratio and the equilibrium relative prices were all determined in the economy, the presentation here takes off by drawing attention to the observation that all these crucial variables were real and directly observable. They were real because the state did not interfere in any way to alter their informational content, and they were directly observable because between them as channels of information and the private economic agents did not intervene any veil-like paper money, which forces people to make decisions on the nominal or fiat money equilibrium values of these variables.
Still, despite the merits of commodity over paper, money-based market systems in terms of democracy and political economy, which we establish in Chapter 9, it is possible that for other reasons, the monetary system in Athens fell short by reference to the objectives central banks are mandated to pursue in our times. For this reason, in this chapter we assess the comparative performance of the monetary system in classical Athens, where commodity-based money was endogenous to the economy, and the United States, where the Fed injects exogenously high-power paper money into the economy and presumably controls the overall money supply through the policy instruments at its disposal. We conduct this assessment on four common performance criteria and find that, with the exception of the rates of economic growth, which were low by comparison to the United States in the last 200 years, the silver-based monetary standard in Athens performed then significantly better than that in the United States in the post-1929 period.
