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To suggest that "free banking" involves the absence of any regulatory 
context is of course wrong.  In America, the regulatory context in New York 
was a well-crafted law that facilitated easy entry into banking, and hence 
competition, and hence innovation. Even the Suffolk system in Massachusetts 
relied on a disciplinary regulatory structure, though one that was largely 
"private" (but it is still effectively state sanctioned). All markets, even 
those for money and finance, are socially constructed, and in the 
Anglo-American experience, that has always meant a formal articulation of 
an initial legal framework to define property, contract, and tort.  The 
historical record of "free banking" may have argued persuasively for the 
ability to devise systems that function without public central banks, but 
it does not suggest that banking (or any market process beyond simple 
commodity exchange) can function without socially defined and enforced 
rules. 
 
Fred C. 
 
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Prof. Fred V. Carstensen                   Office: (860) 486-0614 
Department of Economics                    Dept:   (860) 486-3022 
341 Mansfield Road                         FAX:    (860) 486-4463 
University of Connecticut                  Home:   (860) 242-6355 
Storrs, CT 06269-1063                e-mail: [log in to unmask] 
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