Competitive law is a broad subject that may encompass any economic sector such as transportation, as addressed by Adriano de Carvalho Paranaiba and João Fernando Rossi Mazzoni, under Austrian economics, on the Brazilian transport sector. The aim in the present article, however, is to approach competitive regulation in the monetary sector.
Monetary Regulation
Saifedean Ammous expressed in his recent Fiat Standard that, “Modern economists have never contemplated the possibility that free-market competition could apply to money.” Although a significant part of the economic literature defends current monetary regulation by the state, which led Friedrich von Hayek to say economists had “little cause for pride” in his Nobel Prize lecture, any instituted monopoly—especially a state-instituted monopoly as the official currency—is bad for the economy.
The difference between a state-instituted and an organic monopoly is that the former is permanent, and the latter is temporary and constantly subject to natural competition. As Murray Rothbard lectured, any so-called “monopoly” under a free-market is subject “to the rigors of competition, because if it raises prices and cuts production, another firm might come in and outcompete it.”
Regulation in Favor of State Itself
States have a conflict of interest in establishing a monetary policy, as it allows them another way to finance themselves, beyond regular taxation, through new money emissions. The problem is that this monetary policy consistently devalues people’s money through a phenomenon also known as inflation. That is why, among other things, Friedrich von Hayek argued that there should be a complete abolition of the government’s monopoly over the issue of fiat money.
Bad effects of this monetary policy imposed on the people can also be seen under the antitrust sphere, that is, states tend to prevent any alternative (and potentially better) monetary system to compete with its own official monetary system in order to preserve its control and specially its correspondent veiled source of income. And it is not just a rhetorical argument. States indeed act in an anticompetitive manner when it comes to the monetary sector. According to Oliver Dale, in a news report published by Blockonomi, a former Meta executive recently revealed that Meta’s Libra digital currency project was terminated by political pressure even though it addressed all regulatory concerns. Other than that, the official currency enforcement is an explicit rule in some countries like in Brazil. Article 318 of the Brazilian Civil Code actually states that “agreements to pay in gold or foreign currency are void.”
Although the simple privatization of central banks would probably not solve all the economic problems, it would incentivize the creation of innovative solutions like Bitcoin (with no “central bank” at all) and allow people to effectively choose the best money option on the market. As explained by Robert P. Murphy on Hayek’s proposal, “Precisely because each issuing firm will only provide the money held by a fraction of the public, one firm’s decision to hyperinflate would not be nearly as disastrous as when a monopoly government does so.”
Antitrust Regulation
Just like monetary regulation, antitrust regulation provided by the state is also an erratic regulation. As Murray Rothbard explained, market conditions are not static. Perfect competition does not exist (and cannot exist) in the real world, because the market is based on social dynamic interactions, and therefore, antitrust regulation tries to establish something that cannot exist, thus causing an unnecessary disturbance in competitiveness. Arguments in favor of antitrust regulation, on the other hand, are vague and imprecise, referring to “predatory competitiveness” and other rhetorical concepts that do not make any sense under a free-market environment. That is why antitrust regulation causes, ultimately, competitiveness problems.
In any case, another issue deserves attention here. Monetary policy, under the circumstances expressed in the previous section of this article, is itself against state antitrust regulation like the Sherman Antitrust Act (1890) in the US and Law No. 12,529/2011 in Brazil, as the state itself violates its antitrust regulations when establishing (explicitly or not) a monetary monopoly, or at least trying to establish one, over its citizens.
The Problem
Although, within the framework of legal hermeneutics, it may be acceptable for one specific law to create an exception to another (such as when a law institutes a monetary monopoly in conflict with antitrust law), the law itself cannot fully control its economic effects on the market.
Every law or regulation carries an economic cost that cannot be ignored or precisely predicted, altering economic incentives and stifling innovation and entrepreneurship, as highlighted by Adriano de Carvalho Paranaiba and João Fernando Rossi Mazzoni. Economic development is inherently sensitive to any state-imposed regulation. Therefore, state intervention in the economy should allegedly be an exception.
