This archived content originally appeared at, the predecessor site to, and does not carry the sponsorship of the Cato Institute.

Ronald McKinnon, 1935-2014

Ronald McKinnon, William B. Eberle  Professor of Economics at Stanford University, has died from complications of a fall he suffered 12 days ago. I met McKinnon for the first time a month ago after having corresponded with him a few times over the years. He was hard of hearing but otherwise seemingly in good health. He was still full of plans for the future: we talked about financial sanctions, and he mentioned that if he ever got around to a revised edition of his recent book The Unloved Dollar Standard, it would be the topic of the new first chapter.

McKinnon's relation to free banking comes through his book Money and Capital in Economic Development (1973). It and a book by his Stanford colleague Edward S. Shaw, Financial Deepening in Economic Development (also 1973), introduced the ideas of "financial repression" and "financial deepening." Financial repression consists in various kinds of regulatory attempts to direct credit to favored sectors. Exchange controls, interest rate ceilings, compulsory credit allocations, and other measures promulgated to promote financial deepening and economic growth instead usually end up making the financial system and growth more fragile. Larry White, George Selgin, and others have used McKinnon and Shaw's ideas to argue that restrictions on note issue are a kind of financial repression, and that removing them would promote financial deepening.

Another book by McKinnon that influenced me was The Order of Economic Liberalization: Financial Control in the Transition to a Market Economy (1991, second edition 1993),  an in-depth analysis of how the financial systems of former communist countries could best make the transition to a market economy. Although I disagreed with a number of McKinnon's prescriptions, I appreciated the clarity with which he treated the issues and the coherence of his approach. In my own work proposing the currency board system in several former communist countries. some of which adopted the system, I benefited from knowing McKinnon's ideas.

McKinnon had taught at Stanford since 1961, and was a factor in the rise to prominence of its economics department. His Web site is still here for now.