Money, Banks and Finance in Economic Thought

Berkeley’s Rules for Sound Banking and the Influence of Lord Percival

McPhail Edward, Dickinson College
Rashid Salim, University of Illinois

We discuss George Berkeley’s guiding principles for maintaining a properly functioning banking system. While Berkeley understood the powerful effects such a system has for promoting economic growth, he also recognized the inherent instability and fragility that can plague banking and finance. We provide an analysis of Berkeley’s suggested rules for sound banking and describe the safeguards he believed that would help avoid financial crises. By devising institutions and rules of the game which encourage good behavior and punish bad, Berkeley believed that it was possible to mitigate financial crises. We discuss the problems Berkeley’s rules sought to address and their relevance. As part of our discussion of George Berkeley's monetary views, we also consider possible influencers. We pay particular attention to the role that Lord Percival played in the development of George Berkeley's views on money and banking. For Berkeley, Percival is an important, knowledgable, and persuasive correspondent. Percival's role in the Irish banking debates, his command of facts on the ground, his grasp of the historical record, his ability to synthesize arguments into a compelling narrative, and the clarity of his analysis all make Percival an invaluable correspondent.

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Keywords: George Berkeley, Monetary Economics, History of Banking