Neil Smith


It was commonplace in history for several types of currencies to circulate side-by-side within a country, often by design, and the notion that this may enable improved socioeconomic outcomes has been proposed in narratives across various disciplines. However, orthodox macroeconomic theory presupposes that national economies operate optimally when a single monetary unit is employed: general equilibrium optimisation modelling is applied where coordination is assumed and a single money acts only as numéraire. This thesis adopts a broader Political Economy perspective to develop a general theory macroeconomic model to elucidate the arguments for monetary plurality in a regional context. Cross-disciplinary literature is used to develop a conceptual ordering of themes to inform the modelling. A review of extant economic methodology reveals that its Formalist, Positivist perspective is not well-suited to addressing key issues, thus the research question is ineluctably connected to questions of methodology. An alternative methodology is argued to be more consistent with a necessary Critical Realist perspective and algorithmic reasoning. A modelling framework is developed combining insights from early Mercantilist economists and Classical Behavioural Economics into System Dynamics post-Keynesian Stock-Flow Consistent models. A lexicographic consumption model is developed to enable a core monetary model. This model is augmented with secondary monetary circuits, using three types of complementary currencies: Convertible Local Currency; Mutual Credit Clearing; and Local Government Currency. The models are developed and simulated using stylised facts, demonstrating "Cantillon Effects". The models demonstrate that complementary currencies may be regarded as useful coordinating mechanisms in regions where universal money is lacking. However, the introduction of secondary monies is highly context-dependent: consideration must be given to various institutionally-determined factors. The necessity of appropriate institutional structures justifies a role for government in enabling and promoting complementary currency schemes.

Document Type


Publication Date