Thursday, 19 October 2017


Central Versus Free Banking: the Essay Contest

Posted by
May 9, 2012
in Blog

The Mont Pelerin Society

Friedrich A. Hayek Fellowships

for the


(Prague, Czech Republic – September 2–7, 2012)

“It is important here first to distinguish between the need for some ‘lender of last resort’ and the organization of banking on the ‘national reserve’ principle. … It is far less obvious why all the banking institutions in a particular area or country should rely on a single national reserve. This is certainly not a system which anybody would have deliberately devised on rational grounds and it grew up as an accidental by-product of a policy concerned with different problems. The rational choice would seem to lie between either a system of ‘free banking’, which not only gives all banks the right of note issue and at the same time makes it necessary for them to rely on their own reserves, but also leaves them free to choose their field of operation and their correspondents without regard to national boundaries, and on the other hand, an international central bank. I need not add that both of these ideals seem utterly impracticable in the world as we know it. But I am not certain whether the compromise we have chosen, that of national central banks which have no direct power over the bulk of the national circulation but which hold as the sole ultimate reserve a comparatively small amount of gold, is not one of the most unstable arrangements imaginable.” (F. A. Hayek, Monetary Nationalism and International Stability,  (Graduate Institute of International Studies, Geneva, 1937; Good Money, Part II, The Standard, The Collected Works of F. A. Hayek, volume 6, Liberty Fund, 2008, p. 88.))

Essay Contest

Why did F. A. Hayek say this and do you agree with his conclusions? Which of the two arrangements – free banking or international central banking – best comport with Hayek’s overall philosophy?

  • First prize: $2500 cash award + travel grant*
  • Second prize: $1500 cash award + travel grant*
  • Third prize: $1000 cash award + travel grant*

Visit for more information on the Hayek Essay contest, and visit for more information on the General Meeting.

The Hayek Essay Contest is open to all individuals 35 years old or younger.  Entrants should write a 5,000 word (maximum) essay. Essays are due on June 11th, 2012 and the winners will be announced on July 1, 2012. Essays must be submitted in English only. Electronic versions should be sent to: Prizes are given to the top three essays and include a Hayek Fellow cash award plus a travel grant* to our Society’s next General Meeting in Prague on September 2-7, 2012. The essays will be judged by an international panel of three senior members of the Society.
*Travel grant includes coach class airfare, registration fee, and some meals. Hotel, food, and other expenses will be the responsibility of the attendee.