In this paper we argue that the traditional theory of optimal currency areas, derived from Mundell (1961) cannot be made operational. In particular, we try to show that it is based on obsolete tenets of neo-Keynesian macroeconomics and that it lacks a defensible criterion of optimality, as it is founded not on individuals' preferences concerning money but on a set of more or less arbitrary macroeconomic requirements. We then claim that the question of size and composition of a currency area is not only a question which cannot be answered by the theory of optimum currency areas but that it is a question which can be answered only by a process of competition. Thus, we propose an alternative approach to optimality of monetary areas which is rooted in a broad theory of money as medium of exchange. The theory we put forward in this paper is not novel, and is much inspired by Hayek (1978) and Salin (1993). Its central element is the emphasis on the institutional arrangement of money issue, as we think that the problem of production of money is a problem of possessing the institutions ensuring that the outcome will be optimal from the perspective of consumers. We believe that such arrangement can be found by introducing competition into money issue.

In this paper, I try to explore fundamental elements of Rawlsian theory of justice and social contract and analyze them in light of standard microeconomic theory. In particular, I try to show that the Rawlsian maximin principle does not hold but under very restrictive and implausible assumptions. Then I discuss alternatives put forward by other thinkers who suggest other than well-behaved preference orderings and thus try to justify use of the maximin principle. It appears to me that the maximin principle has no foundations as principle of justice which should guide social action, at least not within the farmework of neoclassical economics

This essay discusses causes of wasteful state aid. We use the model by Dewatripont and Seabright (2005). Our main finding is that the model's main conclusions appear rather robust to various specifications. In particular, the original model assumes that the politician discounts the benefits of the project but not the costs. Yet costs are nothing else but opportunity costs, i.e. benefits of the second-best choice and should be discounted as well. We demonstrate that by modifying the model in the way that costs are discounted equally as benefits, its fundamental results remain unchanged.

The purpose of this essay is to refine the liberal thesis of trade-peace relationship in the light of present-day evidence and contemporary thinking about the nature of conflict. More specifically, we argue that the deterrent effect of free trade on governments' waging wars is extremely difficult to generalize because it depends in a large part on the assumptions one makes about motives and knowledge of belligerents. We assess the nature of voluntary exchange (and thus trade) and reject the Marxist allegation that "asymmetric relations" in trade can be potential sources of conflict. Afterwards we provide an analysis of factors which lead to interstate violence and specify various motives and reasoning which lie behind it. We particularly point out to the possibility of externalization of costs of war, which further weakens the traditional case for direct deterrent effect of trade. The main thesis presented in this essay is that both trade and peace result from a set of ideas and institutions which are common and inseparable and that one cannot exist without another. Thus, in the long run, durable peace can be secured if and only if the classical liberal ideas prevail worldwide.