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n the inertias that generally typify currency use. Monetary history also demonstrates that there tends to be a good deal of market resistance to rapid adoption of any new money, however attractive it may appear to be. Recall, for instance, how long it took the U.S. dollar to supplant the pound sterling in international currency use, even after America's emergence a century ago as the world's richest economy. As Paul Krugman has commented: "The impressive fact here is surely the inertia; sterling remained the first-ranked currency for half a century after Britain had ceased to be the first-ranked economic power" (Krugman 1992: 173). Similar inertias have been evident for millennia in the prolonged use of such international moneys as the Byzantine bezant and Mexican silver peso long after the decline of the imperial powers that first coined them (Cohen 1998: ch. 2). It has also been evident more recently in the continued popularity of America's greenback despite periodic bouts of exchange-rate depreciation. Such immobilism seems very much the rule, not the exception, in currency relations.
Inertia is promoted by two factors. First is the pre-existence of already well established transactional networks, which confers a certain natural advantage of incumbency. Switching from one money to another necessarily involves a costly process of financial adaptation, as numerous economists have emphasized (Dornbusch et al. 1990; Guidotti and Rodriguez 1992). Considerable effort must be invested in creating and learning to use new instruments and institutions, with much riding on what other market agents may be expected to do at the same time. As attractive as a given money may seem, therefore, adoption will not prove cost-effective unless others appear likely to make extensive use of it too. In the words of Kevin Dowd and David Greenaway: "Changing currencies is costly -- we must learn to reckon in the new currency, we must change the units in which we quote prices, we might have to change our records, and so on.... [This] explains why agents are often reluctant to switch currencies, even when the currency they are using appears to be manifestly inferior to some other" (Dowd and Greenaway 1993: 1180).
Second is the exceptionally high level of uncertainty that is inherent in any choice among alternative monies. Since, as indicated, the appeal of any money ultimately rests on an intersubjective understanding, one can never truly be sure of its future value or usability. Uncertainty thus encourages a tendency toward what psychologists call "mimesis": the rational impulse of risk-averse actors, in conditions of contingency, to minimize anxiety by imitative behavior based on past experience. Once a currency gains a degree of acceptance, its use is apt to be perpetuated -- even after the appearance of powerful new challengers -- simply by regular repetition of previous practice. In effect, a conservative bias is inherent in the dynamics of the marketplace. As one source has argued, "imitation leads to the emergence of a convention [wherein] emphasis is placed on a certain 'conformism' or even hermeticism in financial circles" (Orléan 1989: 81-83).
So far, the conservative bias of the marketplace has proved a serious obstacle to the successful introduction of electronic money. But it is by no means an insuperable barrier. Quite the contrary, in fact. As the volume of electronic commerce continues