The Interaction of the Institutions of Money and Liberum Veto in Grand Principality of Litva, or about the Country without Legal Tender

• Main Author: Aliaksandr Kavaliou
• Format: Article
• Language: English
• Published: Ltd. "Humanities Perspectives" 2018-03-01
• Series: Журнал институциональных исследований
• Subjects: social institutions; spontaneous order; money; legal tender; liberum veto
• Online Access: http://hjournal.ru/en/journals/journal-of-institutional-studies/2018/192-no-1/1636-the-interaction-of-the-institutions-of-money-and-liberum-veto-in-grand-principality-of-litva-or-about-the-country-without-legal-tender.html

The article presents an analysis of the interaction of social institutions such money and representative democracy in the Grand Principality of Litva. The article has a twofold goal: firstly, to contribute to the theoretical understanding of the spontaneous orders’ interaction, and, secondly, to contribute the scientific discussion about the complexity and diversity of monetary practices, by the historical experience of Grand Principality of Litva. Throughout its history, the country has avoided government monopolization of the money issue. It was reflected in the absence of a prohibition for the usage of foreign coins as a mean of payment. In addition, at the stage of formation of the state different regions had their own monetary systems which corresponded to the habits of the local population and to best meet the organization of trade with neighbors. The monetary system without prohibition on any currency in circulation has demonstrated flexibility, sustainability and efficiency over the centuries. Decision-making process on economic and political issues was carried out under limitation of the prince power by Parliament. Parliamentary democracy with a tradition of consensus decision-making for a long time was supported the right of liberum veto. It made the possible to create an effective legal system. Interaction of spontaneous orders (democracy with a tradition of an unanimity rule for decision-making, law and money) promoted to defense of these social institutions from the deterioration by government. The article broadens the Gresham's law: in the conditions of the compulsory denomination of some coins and the absence of a ban on the use of a quality coin, the good money drives out the bad ones.