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6 - Money and the Rule of Law

Published online by Cambridge University Press:  13 May 2021

Peter J. Boettke
Affiliation:
George Mason University, Virginia
Alexander William Salter
Affiliation:
Texas Tech University
Daniel J. Smith
Affiliation:
Middle Tennessee State University
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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.

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Money and the Rule of Law
Generality and Predictability in Monetary Institutions
, pp. 146 - 166
Publisher: Cambridge University Press
Print publication year: 2021

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