Free banking as an evolving system: The case of Switzerland
Published online: 21 February 2013
Springer Science+Business Media New York 2013
Abstract Selgin and White (Economic Inquiry 25:439–457, 1987) argue that during its
evolution a free banking system can be expected to reach certain stages of development.
This paper uses their conceptual framework to investigate the free banking era in 19th
century Switzerland and makes three contributions to the literature on free banking.
First, I find that the development of the Swiss banking system closely matches the
stylized evolutionary path depicted by Selgin and White. Second, I argue that after the
introduction of the federal banknote law in 1882, the Swiss banking system can no
longer be characterized as one of free banking. Third, I maintain that the evolutionary
approach offered by Selgin and White opens the door to a better explanation of inter-
bank note exchange complications during the 30 years preceding the introduction of a
Swiss central bank in 1907 than alternative approaches.
Keywords Free banking
JEL Classification N23
Since Hayek’s(1978) work on the denationalization of money and White’s(1984)
study on free banking in Britain, the revived discussion of free banking, both
theoretically and in the form of case studies, has been vibrant.
Rev Austrian Econ (2014) 27:57–69
For an overview of the literature see, for instance, Dowd (1992), Selgin and White (1994), and Briones and
Department of Economics, University of Leipzig, Leipzig, Germany
A. Fink (*)
Institut für Wirtschaftspolitik, University of Leipzig, Grimmaische Str. 12, 04109 Leipzig, Germany