Abstract

A previous essay by John D. Feldmann entitled “The Fed as a Moral Enterprise” argued that monetary policy inextricably involves moral issues and further, that monetary policies must be properly justified morally. That article focused on the inadequacy of act consequentialism as a moral framework. Under act consequentialism the Fed does not properly take into account the potential consequences and thus lacks the structure for proper moral assessment. This essay takes the critique of consequentialist thinking into the rules versus discretion debate, arguing that the rule of thumb concept advanced in contemporary rule-based arguments is only part and not a fully adequate basis for a rule-based system for monetary policy. It argues that definite boundary-setting rules for central bank policy are needed, what the author calls rules of practice after John Rawls, if rules are again to be at the center of central bank thinking. The article then goes on to propose a source for rules of practice in the monetary policy writings of John Locke.

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