1142 | Law & Economics of Public Finance – The Fiat Money Economy and its Laws

As Covid-19’s devastating impact on human lives unfolded, the most contentious issue of modern monetary systems and central banking became a dinner table conversation – should central banks print money for the purposes of funding transfers and other public spending?

In recent financial crisis (such as Global Financial Crisis 2008), bankers and economists across countries have advocated for and experimented with the possibilities that fiat money presents for economic recovery (eg., quantitative easing). The issue, though, needs to be approached conceptually and systematically to avoid ad-hocism and to assess the true extent of the possibilities that fiat money creates (think Universal BasicIncome for example).

This course engages with fundamental economic concepts – scarcity, efficiency, money, debt and taxation. At this point, one needs to appreciate that our economics is inextricably linked to our political theories and laws. The course will be an inquiry into – What is the legal position (and its rationale) on money creation and its flow through the economy? What is the significance of laws relating to debt and taxation? In view of the shift from commodity backed money to fiat money, should the present legal position be revised? What would be the relevant considerations in doing so? These questions also warrant an examination of the constitutional framework governing public finance; and this would form the subject matter of a separate elective course.