The Cato Institute has recently published a paper by Jeff Hummel, called “Should Governments Restrict Cash?” As you should expect it’s an excellent overview of the topic and contains multiple astute insights. Hummel considers the two main cases for abolishing cash - (1) to crackdown on criminal activities; and (2) as a means to conduct monetary policy. He notes that some economists stress the former (Larry Summers) and some the latter (Willem Buiter) and his central target is someone who advocates both - Kenneth Rogoff.
Hummel persuasively argues that the burden of proof should fall on those who want to abolish cash to demonstrate that the benefits of doing so would outweigh the costs. And I think he’s right to point out that thus far they’ve neglected a number of important insights. Such as:
Actual welfare analysis needs to take place which distinguishes between wealth creating black market activity and wealth destroying illegal activity.
Inflation is a tax on real money balances and therefore is currently used as a tax on illegal activity. Therefore going cashless would alter the tax rate facing criminals.
The highest denominated banknotes provide the highest amounts of seigniorage. Abolishing them would therefore impact public finances.
The US Dollar is a global public good and affects welfare in dollarised countries as well as non-dollarised countries. There’s no evidence to say that restricting the ability of Russian criminal gangs to use US banknotes would compensate for depriving normal Russian families of diversifying from Ruble holdings.
I’m open minded about the so called “war on cash” and conscious of the fact that my instinctive support for anonymous forms of payment cuts against the potential for central banks to solve coordination problems in systems where they are in fact the monopoly provider or currency. However Hummel nicely presents where the defense lines are and since they’re yet to be breached it seems clear that monetary economists have an obligation to protect people’s rights to use cash.