Is Cash a Public Good or a Basic Right?
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There is growing awareness in many countries of the declining use of cashMoney in physical form such as banknotes and coins. More for day-to-day transactions and the shrinking infrastructure for cash distribution. Changes have accelerated with the Covid-19 crisis, and more recently, central bank digital currencyThe money used in a particular country at a particular time, like dollar, yen, euro, etc., consisting of banknotes and coins, that does not require endorsement as a medium of exchange. More projects have added further uncertainty about future cash usage. Some have welcomed these developments for the sake of modernisation and economic efficiency.
Cash as a Public Good?
Nevertheless, voices have also drawn attention to the collective benefits enabled by cash —such as protection of privacy, fee-free payments, stabilisation in times of crisis, resilience, and social and economic inclusion— as well as its long-lived embedding in our social and cultural practices. These authors have also argued that cash is a safeguard against the vulnerabilities of electronic paymentA transfer of funds which discharges an obligation on the part of a payer vis-à-vis a payee. More systems in the event of natural disasters, digital attacks, or war. This literature is, however, relatively recent and has yet to be consolidated. Further deepening is needed to advance the debate and draw meaningful guidelines for future policy.
Defining cash as a public good or a basic right are two possible approaches to apprehend these desirable aspects of cash, with significant policy implications; for economists, public goods are defined by two criteria: (i) non-rivalry — my consuming the good does not affect others’ consumption — and (ii) non-excludability — there is no way to prevent everyone from using them by imposing a fee. These goods are subject to the so-called free-rider problem: most consumers will make use of them without paying and, as a result, they will be underproduced (or not produced at all) unless the government steps in to ensure sufficient funding; however, it does not necessarily have to take over responsibility for its direct provisioning.
Some argue that cash does not fulfil the criteria of a public good. Whereas, typically, no one is excluded from using cash, cash balances are rivalrous since they cannot be held or spent by two people simultaneously.
Nevertheless, others argue that if cash is looked at not as a commodity but rather as an institution or an infrastructure, the cash ecosystem can be used by everyone simultaneously without negatively affecting its use by others. Others argue that, although cash does not qualify as a public good, some of the critical attributes of cash qualify as a public good. For instance, everyone benefits from privacy, social inclusion, and a resilient form of moneyFrom the Latin word moneta, nickname that was given by Romans to the goddess Juno because there was a minting workshop next to her temple. Money is any item that is generally accepted as payment for goods and services and repayment of debts, such as taxes, in a particular region, country or socio-economic context. Its onset dates back to the origins of humanity and its physical representation has taken on very varied forms until the appearance of metal coins. The banknote, a typical representati... More in case of cyberattacks or electric grid failures.
However, both paths lead to the same obstacle: economic analysis of public goods is only helpful in determining the optimal level of a single quantitative dimension. For example, in the case of clean air, the optimal amount of CO2 emissions. However, the cash system, privacy, or inclusion are complex and abstract notions to be reduced to a single dimension. Therefore, the problem is less about quantities but about rethinking cash features so it can provide greater economic benefits.
Cash as a Basic Right?
The alternative approach to cash as a public good builds upon the civil and political rights tradition to claim that cash is a basic right. Basic rights aim at ensuring a minimum fairground to every member of the society based on shared values, which should include payments’ privacy or the economic inclusion enabled by cash. The policy implications of this approach are slightly different. On the one hand, the broad policy goal is more straightforward than within the economics’ public goods framework: guaranteeing access to and use of cash for everyone. On the other hand, public provisioning is not the only way of achieving this goal: the state could $ use its sovereignty to set the right incentives for or impose obligations on the private sector (with the result depending on the capacity of the government to ensure the respect of these obligations). There are also additional operational issues to address. Giving cash the status of a basic right may require modifying countries’ constitutions and, hence, a wide degree of agreement, which may not be easy to achieve. In turn, an eventual right to cash could clash with other fundamental rights, jeopardising the practical effects of such a reform.
While defining cash as a public good or a basic right may lead to attributing the government — or an institution designated by the government — a duty to ensure the continuity of cash, moving from theory to practice involves addressing three key questions. First, how should the decision-making process be? Should it be open to public consultation or left exclusively to specialists? Second, how should the specific operational goals be defined as quantitative parameters (for example, a maximum time and cost to access an ATM) or somewhat more qualitative assessments (such as citizens’ satisfaction with the state of affairs)? Third, how are the operational goals to be achieved? Can the cash cycleRepresents the various stages of the lifecycle of cash, from issuance by the central bank, circulation in the economy, to destruction by the central bank. More be supported solely by market forces? Should the State and, therefore, the taxpayer contribute? Could the payment system support the cash ecosystem as it provides users inclusion, resilience and choice? Alternatively, we could also opt for rethinking the current infrastructure, whether relying on private cash-tech innovations, public sector innovation or public-private partnerships. Either way, a decision will have to be taken on who will bear the burden of financing the (from a society’s perspective) ideal cash infrastructure. Last but not least, exploring how each cash model is in line or at odds with ongoing work on central bank digital currencies, another form of public money, is essential.
Join us at the Future of Cash Conference in Istanbul on November 6 at 13:30 with Ursula Darlinghaus (Assistant Professor of Anthropology in the Department of Sociology and Anthropology at Ripon College), Frédéric Allemand (Research Fellow at the Robert Schuman Institute at the Faculty of Law, Economics and Finance of the University of Luxembourg), Tim Stuchtey (Executive Director of the Brandenburg Institute for Society and Security), Franz Seitz (Associate Professor at the Weiden Technical University of Applied Sciences), Carin van der Cruijsen (senior researcher at De Nederlandsche Bank) and Héctor Labat Moles (Research Fellow at CashEssentials).
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