By Karl-Friedrich Israel
The traditional argument for fiduciary media and ultimately unbacked fiat money was based on the costs of production. The real resources otherwise used for gold mining and minting could, under a fiat standard, be used for other productive purposes and thus enrich society as a whole. The argument goes back at least to such great names as Adam Smith and David Ricardo.
More recently, Milton Friedman reinvigorated the argument, and we are still today presented with it in standard textbooks. However, a recent study published in the Economics Bulletin demonstrates that the