Time for global money? Not yet. The perfect should not be made the enemy of the good.

• Author: Hatheway, Larry

Today's world is more economically and financially integrated than at any time since the latter half of the nineteenth century. But policymaking--particularly central banking--remains anachronistically national and parochial. Isn't it time to re-think the global monetary (non)system? In particular, wouldn't a single global central bank and a world currency make more sense than our confusing, inefficient, and outdated assemblage of national monetary policies and currencies?

Technology is now reaching the point where a common digital currency, enabled by near-universal mobile phone adoption, certainly makes this possible. And however farfetched a global currency may sound, recall that before World War I, ditching the gold standard seemed equally implausible.

The current system is both risky and inefficient. Different monies are not only a nuisance for tourists who arrive home with pockets full of unspendable foreign coins. Global firms waste time and resources on largely futile efforts to hedge currency risk (benefiting only the banks that act as middlemen).

The benefits of ridding the world of national currencies would be enormous. In one fell swoop, the risk of currency wars, and the harm they can inflict on the world economy, would be eliminated. Pricing would be more transparent, and consumers could spot anomalies (from their phones) and shop for the best deals. And, by eliminating foreign-exchange transactions and hedging costs, a single currency would reinvigorate stalled world trade and improve the efficiency of global capital allocation.

In short, the current state of affairs is the byproduct of the superseded era of the nation-state. Globalization has shrunk the dimensions of the world economy, and the time for a world central bank has arrived.

Dream on. A single world currency is in fact neither likely nor desirable.

Central banks, while ideally independent from political influence, are nonetheless accountable to the body politic. They owe their legitimacy to the political process that created them, rooted in the will of the citizenry they were established to serve (and from which they derive their authority).

The history of central banking, though comparatively brief, suggests that democratically derived legitimacy is possible only at the level of the nation-state. At the supra-national level, legitimacy remains highly questionable, as the experience of the eurozone amply demonstrates. Only if the European Union's sovereignty...