Is Cash a Public Good or a Basic Right?

The Future of Cash Conference 2023 (Istanbul, 6-8 November) will kick-off with a research seminar organised by CashEssentials. International researchers from different fields will discuss whether cash qualifies as a public good or as a basic right, and the policy implications of this.

There is growing awareness in many countries of the declining use of cash for day-to-day transactions as well as the shrinking infrastructure for the distribution of cash. Changes have accelerated with the COVID-19 crisis and, more recently, central bank digital currency projects add further uncertainty as to future cash usage. Some have welcomed these developments for the sake of modernisation and economic efficiency.

Nevertheless, voices have also drawn attention to the existence of several 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. Cash is also a safeguard against the vulnerabilities of electronic payments systems in the event of natural disasters, digital attacks, or war.

These voices are, however, quite recent and have yet to consolidate. 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 important policy implications.

Defining a public good

For economists, public goods are defined by two attributes: (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 different people at the same time.

Nevertheless, others argue that if cash is looked at not as a commodity but as an institution or an infrastructure, the cash ecosystem can be used by everyone at the same time without affecting negatively its use by others.

In addition, some argue that, although cash does not qualify as being a public good, some of the key attributes of cash do. For instance, everyone benefits from privacy, social inclusion, and a resilient form of money in case of cyberattacks or electricity 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.

But in the cash system, privacy or inclusion are quite complex and/or abstract notions to be reduced to a single dimension. Therefore, the problem is less about quantities, but about rethinking the features of cash so it can provide the greater benefits for the economy.

Alternative approach to cash

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 fair ground to every member of the society on the basis of common moral 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 also 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 potentially clash with other fundamental rights, which could jeopardise 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 in the hands of specialists?

Second, how should the specific operational goals be defined: as a set of quantitative parameters (for example, a maximum time and cost to access an ATM) or rather more qualitative assessments (such as citizens’ satisfaction with the state of affairs)?

Third, how are the operational goals to be achieved? Can the cash cycle be supported solely by market forces? Should the state and therefore the taxpayer contribute? Could the cash ecosystem be supported by the payment system as it provides inclusion, resilience and choice to its users. 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, it is important to explore how each cash model is in line or at odds with ongoing work on central bank digital currencies, another form of public money.

Addressing these questions

Join us for addressing these questions in this seminar on 6 November 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).