Reforming the world monetary system : How Fritz Machlup built consensus among business leaders and academics using scenario analysis

Purpose – The purpose of this paper is to examine Fritz Machlup's method and use of scenario analysis in the policy discussions around exchange rate solutions to balance of payments problems. Design/methodology/approach – The qualitative research on which this paper is based is the sociohistorical biographical approach, based on a close examination of published works and archival materials. Findings – What makes Machlup unique is his focus on the impact to an economic system of discrete human actions, each set of actions associated with a change in exchange rate policy and the operations and institutions necessary to implement it. Impact on the system was evaluated in terms of three values – balance of payments adjustment, liquidity and confidence. In his use of a system's approach, his focus on change and adjustment to change, and most particularly his focus on human action, Machlup is also distinctively Austrian. Research limitations/implications – This is the first paper generated from the author's far larger planned study of Fritz Machlup and the Bellagio Group. Practical implications – The collaborative exploration of alternative futures by senior teams has become increasingly important to strategic planning by governments and corporations. Originality/value – The story of the Fritz Machlup's contribution to exchange rate regimes, international trade and the balance of payments has remained largely untold.