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Money and the Rule of Law

32 Pages Posted: 6 Jun 2016 Last revised: 3 Jan 2017

Glenn L. Furton

Texas Tech University

Alexander William Salter

Texas Tech University - Rawls College of Business

Date Written: January 1, 2017

Abstract

Contemporary monetary systems permit those in positions of authority to exercise discretionary power in the pursuit of monetary policy objectives. We argue there are strong prima facie reasons why this is normatively problematic. Engaging the literature on the rule of law, we argue that a general and nondiscriminatory rule ought to apply to monetary institutions for the same reasons such a rule ought to apply to other important institutions. We recognize that this prima facie case may be overcome by sufficiently strong consequentialist concerns, but show that these concerns are ungrounded: discretionary monetary authorities, both in theory and practice, perform poorly. We thus affirm the importance of the rule of law for monetary policy as a requisite for both non-arbitrary governance and macroeconomic stability.

Keywords: Liberalism, Monetary Institutions, Monetary Policy, Rule of Law

JEL Classification: E42, E52, G21, H11, H41, P16

Suggested Citation

Furton, Glenn L. and Salter, Alexander William, Money and the Rule of Law (January 1, 2017). Review of Austrian Economics, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2790213 or http://dx.doi.org/10.2139/ssrn.2790213

Glenn L. Furton

Texas Tech University ( email )

2500 Broadway
Lubbock, TX 79409
United States

Alexander William Salter (Contact Author)

Texas Tech University - Rawls College of Business ( email )

Lubbock, TX 79409
United States

HOME PAGE: http://awsalter.com

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