Banking without a Central Bank: Scotland before 1844 as a ‘Free Banking’ system

  • Lawrence H. White


The traditional view of Scottish banking experience is that the system in operation there before 1844 warranted the label of ‘free banking’ that it has commonly received. That is, the regulatory regime approximated laissez-faire closely enough that its institutions, practices, and performance were essentially those of an unregulated free-market monetary system. This view was promoted by the nineteenth-century advocates of free banking in Britain, America, France, and elsewhere, who cited Scottish banking as a model to be emulated.1 It permeates the early histories of Scottish banking, most notably that of Andrew Kerr (1884). In more recent literature, it underlies the summaries of the Scottish experience offered by Vera Smith (1936, ch. 2), Rondo Cameron (1967, ch. 3) and myself (White (1984), ch. 2), and the use of the Scottish experience as counter-evidence to the legal restrictions theory of money (White (1987)).


Central Bank Private Bank Free Banking Public Bank Free Banking System 
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Copyright information

© Forrest Capie and Geoffrey E. Wood 1991

Authors and Affiliations

  • Lawrence H. White

There are no affiliations available

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