Optimal Monetary Policy

11/15/2017            Jörg Guido Hülsmann


Mainstream writings on monetary policy typically focus on the goals that are assumed to be the goals of monetary policy makers. Inflation targeting, employment, equilibration of the balance of payments, growth targets for monetary aggregates, the stabilization of exchange rates, GDP, or asset prices—these and similar goals for monetary policy are discussed in more or less detail in present-day textbooks. When it comes to the means by which these ends are to be reached, the discussion stops altogether and gives way to a description of the technicalities of open market policies, discount rates, reserve requirements, and so on.

In the present article, we will neglect these technicalities of monetary policy and focus on ultimate means and ends. The rationale for this procedure is twofold.

On the one hand, ends such as inflation targeting and growth rates of monetary aggregates are not ultimate, but intermediate ends. The tacit understanding is that they are more or less closely related to the attainment of the ultimate end—the reduction of scarcity (increase of “prosperity” or “wealth”). Our approach allows us to sidestep the discussion of the validity of this tacit understanding. We will directly address the more fundamental question to what extent monetary policy can and does affect the wealth of the community of money users at all.

On the other hand, the focus on ultimate means allows us to study monetary policy from a far more general point of view than is usually done. In particular, it allows us to interpret the institutional framework of money production as one of the means of monetary policy, and to compare different institutional set-ups. Our approach takes it for granted that central banks, the IMF, the World Bank, and other national and international monetary organizations are not ultimate givens, but creatures of the human will. They are means of monetary policy in the fundamental sense in which we understand this word. And as mere means to an end, rather than ends in themselves, they can be compared to other institutional arrangements that are supposed to attain the same ultimate end of reducing scarcity.

La suite sur Mises Institute


About ecoparis

Un groupe de chercheurs en économie autrichienne
This entry was posted in Economie Autrichienne, monnaie. Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s