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We consider the debut of a new monetary instrument, central bank digital currencies (CBDCs). Drawing on examples from monetary history, we argue that a successful monetary transformation must combine microeconomic efficiency with macroeconomic credibility. A paradoxical feature of these transformations is that success in the micro dimension can encourage macro failure. Overcoming this paradox may require politically uncomfortable compromises. We propose that such compromises will be necessary for the success of CBDCs. JEL classification: E42, E58, N10 Key words: monetary systems, banknotes, central banks, digital currencies, Every year a new cohort of economists begins their professional careers with a trip into a fantasy land, one more unlikely than anything Walt Disney ever imagined. In this make-believe [...]

Working Paper 2010-17 December 2010 Abstract: We investigate a fiat money system introduced by the Bank of Amsterdam in 1683. Using data from the Amsterdam Municipal Archives, we partially reconstruct [...]

Working Paper 2008-22 September 2008 This paper presents a monetary-theoretic model to study the implications of networks' collection of personal identifying data and data security on each other's incidence and [...]

Working Paper 2005-19 August 2005 Abstract: The quintessential crime of the information age is identity theft, the malicious use of personal identifying data. In this paper we model 'identity' and [...]

Abstract: An extensive literature in monetary theory has emphasized the role of money as a record-keeping device. Money assumes this role in situations where using credit would be too costly, [...]

Abstract: What are the benefits provided by a payment system? What are the tradeoffs in public versus private payment systems and in restricted versus open payments arrangements? Modern payment systems [...]