The War on Cash: What Do You Have to Hide?
Some economists, including Harvard’s Ken Rogoff, want to minimize the circulation of cash. Such proposals are usually justified on the grounds that they would (1) reduce criminal activity and tax evasion while also (2) helping central banks execute monetary policy when interest rates are at the zero lower bound. Both arguments have been challenged on this blog (here, here, and here).
In practice, politicians interested in demonetization have relied primarily on the first justification. If you are conducting legal transactions, they say, you should have no problem using a check, debit card, or credit card—all of which leave a (digital) paper trail. Only those involved in illegal activities—including underreporting one’s income—would object to such a policy. What do you have to hide?
There are, in fact, many legitimate reasons for conducting transactions in cash. Some might hope to avoid bank fees. Others might rely on cash as a mechanism to stay on budget. But perhaps the best response to the “What do you have to hide?” objection is “None of your business!” Some of us still value financial privacy.
The what-do-you-have-to-hide objection assumes one is guilty until proven innocent. It ignores the usual presumption of innocence—a basic civil liberty protected in well-functioning democracies. Instead, it requires defending one’s actions despite no evidence of wrongdoing. Such a policy is inconsistent with the liberal tradition. It is the way of despots. Surely we can find a better way to deal with crime and tax evasion.
Nicolás Cachanosky
Dr. Cachanosky is Associate Professor of Economics and Director of the Center for Free Enterprise at The University of Texas at El Paso Woody L. Hunt College of Business. He is also Fellow of the UCEMA Friedman-Hayek Center for the Study of a Free Society. He served as President of the Association of Private Enterprise Education (APEE, 2021-2022) and in the Board of Directors at the Mont Pelerin Society (MPS, 2018-2022).
He earned a Licentiate in Economics from the Pontificia Universidad Católica Argentina, a M.A. in Economics and Political Sciences from the Escuela Superior de Economía y Administración de Empresas (ESEADE), and his Ph.D. in Economics from Suffolk University, Boston, MA.
Dr. Cachanosky is author of Reflexiones Sobre la Economía Argentina (Instituto Acton Argentina, 2017), Monetary Equilibrium and Nominal Income Targeting (Routledge, 2019), and co-author of Austrian Capital Theory: A Modern Survey of the Essentials (Cambridge University Press, 2019), Capital and Finance: Theory and History (Routledge, 2020), and Dolarización: Una Solución para la Argentina (Editorial Claridad, 2022).
Dr. Cachanosky’s research has been published in outlets such as Journal of Economic Behavior & Organization, Public Choice, Journal of Institutional Economics, Quarterly Review of Economics and Finance, and Journal of the History of Economic Thought among other outlets.
