In the second half of the nineteenth century, the Chilean free banking system worked similarly to how Adam Smith describes the eighteenth-century free banking system in Scotland. The characteristics of free banking that Smith identifies as conductive of successful outcomes—free entry, unlimited liability, and convertibility on demand—are present in both Scotland and Chile. And the Chilean system failed for similar reasons to the worries Smith had about the Scottish system: inconvertibility, legal tender, involvement with government borrowing, and lobbying. The Chilean experience of free banking appears to follow Smith's account of free banking.

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