In his book The Cash Nexus, historian Niall Ferguson felt it necessary to argue against the view that it is entirely economic forces that have shaped the history and current state of societies around the world. While we would not take the extreme view that only economic factors are important in understanding history, it is certainly true that economic forces have had a huge impact on many aspects of society. Central banks are, and have been, a major economic force, influencing a wide range of other economic events and, as a consequence, the course of history. But a tantalizing and important question remains: Are central banks an inevitable historical outcome, or just one of many possible institutions that can (and will) arise in the course of economic development?

As we enter the twenty-first century, it seems natural to reevaluate the appropriate roles—if not, in fact, the need—for central banks. To foster this reevaluation, in the spring of 2001 the Federal Reserve Bank of Cleveland held a conference on “The Origins and Evolution of Central Banking.” The purpose of the conference was to shed light on how central banks have come to be what they are, what their objectives ought to be, how central banks should operate to best achieve these objectives, and what kinds of challenges such institutions might face in the twenty-first century.

There have been few times in history when so many fundamental questions about the role of central banks have been on the table simultaneously.