Here’s a letter to the Washington Post:
George Will’s superb column on the Fed’s over-expansive “dual mandate” ends with an apt warning from the late Nobel laureate economist F.A. Hayek that any attempt to engineer economies – even via monetary policy – is evidence of a “fatal conceit” (“The trap of the Federal Reserve’s dual mandate,” Nov. 18). It’s unsurprising, therefore, that Hayek was among the first economists to call for removing government from the business of supplying and regulating money.
In 1976, Hayek published a pioneering monograph entitled Denationalisation of Money* in which he argued that not only can markets supply sound money, but that markets are likely to do so far more reliably than will any government or central bank.
Hayek’s work is the font of a fertile river of research on the history and theory of ‘free banking’ (whose chief contributors are my GMU colleague Lawrence White and my former GMU colleague George Selgin**). This research leaves no doubt that, had money been supplied privately from the start of the republic, U.S. economic growth would have been both steadier and steeper.
Donald J. Boudreaux
* F. A. Hayek, Denationalisation of Money (London: Institute of Economic Affairs, 1976). A substantially revised second edition was published in 1977.
** See, e.g., George A. Selgin and Lawrence H. White, “How Would the Invisible Hand Handle Money?” Journal of Economic Literature, Dec. 1994, Vol. 32, pp. 1718-1749.