Book contents
- Money and the Rule of Law
- Money and the Rule of Law
- Copyright page
- Dedication
- Contents
- Preface
- Acknowledgments
- 1 Introduction
- 2 Knowledge Problems with Discretionary Monetary Policy
- 3 Incentive Problems with Discretionary Central Banking
- 4 When Firefighters Are Arsonists
- 5 On the Shoulders of Giants
- 6 Money and the Rule of Law
- 7 Conclusion
- Index
- References
6 - Money and the Rule of Law
Published online by Cambridge University Press: 13 May 2021
- Money and the Rule of Law
- Money and the Rule of Law
- Copyright page
- Dedication
- Contents
- Preface
- Acknowledgments
- 1 Introduction
- 2 Knowledge Problems with Discretionary Monetary Policy
- 3 Incentive Problems with Discretionary Central Banking
- 4 When Firefighters Are Arsonists
- 5 On the Shoulders of Giants
- 6 Money and the Rule of Law
- 7 Conclusion
- Index
- References
Summary
In this chapter, we focus on the idea of the rule of law in the classical liberal tradition. The rule of law is a basic jurisprudential norm that undergirds liberal democracies. We show that discretionary central banking is inconsistent with the rule of law. Discretionary central banking fails the test of generality: It benefits special interests, but not the public as a whole. Also, discretionary banking fails the test of predictability: It does not create an environment conducive to reliable public expectations of future policy. For these reasons, it is unlikely that discretionary central banking can be reconciled with self-governance. We reaffirm the imperative of liberal democracy, as well as uncovering monetary institutions that are compatible with liberal democracy. Until we do so, we fail to meet the basic challenge of self-governance.
- Type
- Chapter
- Information
- Money and the Rule of LawGenerality and Predictability in Monetary Institutions, pp. 146 - 166Publisher: Cambridge University PressPrint publication year: 2021