In this chapter, we extend the basic overlapping generations model so that we can examine other ways in which people pay for things. We have delved into economies in which fiat money can be used to execute trades between people from different generations by solving the record-keeping friction.

During the 2020 COVID pandemic, the United States passed the Coronavirus Aid, Relief, and Economic Security Act. The goal was to provide immediate relief to families and businesses affected by the actions implemented to curtail the spread of the coronavirus. With declining tax revenues, the U.S. government relied on deficits in order to finance these spending increase. The attention from the media, politicians, and economists focused sharply on deep divisions regarding the efficacy of such spending packages to stimulate economic activity.

This chapter examines the interplay between law and politics in the UK Constitution, highlighting that, in many ways, the study of the UK Constitution is a study of politics as much as a study of law. Two alternative readings of the UK Constitution will be introduced. First, we consider the ‘political’ constitution as outlined by J. A. G. Griffith, before moving on to look at the contrasting ideas associated with legal, or common law, constitutionalism. The political constitution emphasises the primacy of the political process as the constitutional means through which government operates and is regulated. The ideas of legal constitutionalism, by contrast, prioritise the need for law to control governmental activity. In turn, each model envisages a particular role for the courts within the constitution. Courts in the ‘political’ constitution play a limited role, secondary to that of elected politicians. By contrast, legal constitutionalism envisages a more active role for the judges in holding elected politicians to account, envisaging the law as articulating the fundamental guiding principles of the constitution.

The Freedom of Information Act 2000, which came into force in 2005, provides, for the first time, a legally enforceable right of access to official information. This chapter examines the benefits of freedom of information and the scheme and scope of the Freedom of Information Act, examining how it balances the competing interests in the disclosure and retention of official information. The enforcement mechanisms in the Act are outlined and the ministerial veto power discussed. The chapter concludes by examining the effectiveness of the openness regime imposed by the Freedom of Information Act.

In the UK Constitution, Parliament provides the primary public forum in which the government is held to account on behalf of the electorate. The idea that the government and its ministers are, collectively and individually, responsible to Parliament for their policies, actions and inactions is perhaps the core principle on which accountability within the framework of the political constitution is based. This chapter opens by briefly contrasting the mechanisms of political and legal accountability within the constitution, before going on to examine the doctrine of ministerial responsibility to Parliament, considering its requirements, operation and effectiveness.

While the doctrine of legal sovereignty undoubtedly forms the backbone of the UK’s Constitution, it should be considered alongside the principle of the rule of law and – to a lesser extent – that of separation of powers. Parliamentary sovereignty is also closely aligned with the idea of political accountability. Each of these additional constitutional principles is considered in the chapters which follow.

The House of Commons is the repository for elected legitimacy in the UK’s national system of governance. Over the course of the twentieth century, this political fact relegated the House of Lords to the status of a subordinate chamber. This chapter examines the reason why the House of Commons came to dominate the UK Parliament by considering the problems with the composition of the House of Lords (it is a largely appointed House which still retains some hereditary membership) and the process by which the Commons came to strip the Lords of its equal role in the UK’s law-making process (replacing the Lords’ veto over legislation with a mere delaying power). This chapter also considers the role that this subordinate chamber continues to play in the legislative process. Today, the work of the House of Lords is dominated by scrutinising and, where necessary, revising legislation produced by the Commons. The unelected nature of the UK’s second chamber remains a contentious constitutional issue, one which has not been solved despite frequent reform proposals in the last two decades.

Now that we know how people execute trades in a pair of one-time meetings without money, we add a friction into the model that can account for valued fiat money. The key friction is that record-keeping is costly. Suppose, for example, that the cost of maintaining such a record-keeping device is prohibitively high.

For the past several chapters, we have been studying model economies in which fiat money and deposits coexist as stores of value. Now we turn our attention to model economies in which fiat money and private debt are both used as means of payment. Here, spatial separation – that is, physically separating debtors and creditors – serves to describe a friction that affects debt clearing. By separating creditors and debtors, there is an information problem that keeps private debt from being used as means of payment.

The governance arrangements of the UK, and even its borders, have developed over many centuries and will continue to be subject to change. For a long period after its creation the UK maintained highly centralised governance arrangements based upon the sovereign Parliament in Westminster. Over the twentieth century these arrangements enabled central government to introduce far-reaching measures, from state pension provision to the National Health Service and comprehensive education. Nonetheless, because Westminster is dominated by MPs representing English constituencies, its legislative output was not always constrained by the wishes of MPs representing seats in Scotland, Wales or Northern Ireland. This chapter traces how discontent at the degree of centralisation in the UK has been answered by the devolution of law-making power to institutions in Scotland, Wales and Northern Ireland. Each of these sets of devolved institutions has different powers and functions, which will be explored in turn (including an evaluation of how these arrangements have changed since devolution was introduced in 1998). Only then can we consider whether devolution has provided a solution to the challenges inherent in governing a country as complicated as the UK.

Much of this book has mapped the principles underpinning the UK Constitution. Judicial review provides an outlet by which those affected by government actions (including individuals, companies, pressure groups, and even other public bodies) can approach the courts to examine the lawfulness of such actions. It is the jurisdiction through which many of the most celebrated cases relating to the rule of law and separation of powers have been decided. The exercise of this jurisdiction therefore defines the courts’ relationship with other branches of government. This chapter assesses the basis for, and boundaries of, judicial review. It also examines the procedure by which judicial review is initiated and the remedies available for successful claimants.

It is one of the central functions of Parliament to scrutinise the policies, administration and legislative proposals of the government of the day. This chapter examines the various mechanisms through which Parliament is able to extract information from, and monitor, members of the executive. Against the backdrop of the well-known tendency towards executive dominance of the business of Parliament, this chapter examines the effectiveness of these mechanisms and proposals for their reform.

Throughout the latter half of the twentieth century UK policy makers and constitutional lawyers grappled with how to incorporate human rights concerns into a constitution based upon the theoretically unlimited legislative power of Parliament. This chapter charts progress towards this goal, examining first the inadequacies of the protection of ‘civil liberties’ in the UK under common law and statute. We then consider how other countries have attempted to reconcile majoritarian democratic politics with legal protections for individual rights, and how these efforts influenced the UK in the development of the Human Rights Act 1998 (HRA). The remainder of the chapter examines the scheme of the HRA 1998, considering what rights were incorporated under the Act and the powers that the courts gained over legislation and over the activities of public bodies.

In this chapter, we develop a model economy in which people hold currency and deposits. When we look at data, we observe lots of movements in our measures of the monetary aggregates. Why is this so? By definition, the total money stock is the product of the monetary base and the money multiplier. Observable changes in the monetary aggregates that do not come from changes in the monetary base must result from changes in the money multiplier.