The Rent-Seeking Origins of the Federal Reserve

Firm and Competitive Environment, 2009, Brno: MUAF in Brno, 2009

11 Pages Posted: 30 Oct 2010 Last revised: 22 Aug 2011

See all articles by Tomáš Otáhal

Tomáš Otáhal

Mendel University - Faculty of Economics and Business Administration

Date Written: August 30, 2009

Abstract

This paper explores the possibility that the establishment of central banks may have not been the result of socially beneficial public policy but the result of rent-seeking. I use the case of the most powerful central bank in the world as a model. In the paper I classify and explain the possible motivations of three interest groups: (i) the federal government, (ii) small-scale state and national bankers, and (iii) financial entrepreneurs. The federal government and the financial entrepreneurs invested resources into creation of barriers to entry in order to restrict small-scale state and national banks in competition. This process resulted in the establishment of a central bank controlled by the federal government.

Keywords: Federal Reserve System, Rent-Seeking

JEL Classification: D72, D73, N21, E42, E58

Suggested Citation

Otáhal, Tomáš, The Rent-Seeking Origins of the Federal Reserve (August 30, 2009). Firm and Competitive Environment, 2009, Brno: MUAF in Brno, 2009, Available at SSRN: https://ssrn.com/abstract=1700135 or http://dx.doi.org/10.2139/ssrn.1700135

Tomáš Otáhal (Contact Author)

Mendel University - Faculty of Economics and Business Administration ( email )

Staňkova 578/16b
Brno, 602 00
Czech Republic

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