Advocates of central bank reform must examine why central banks emerged and what forces sustain them. They did not arise in an institutional vacuum, and will not be reformed in an institutional vacuum. The historical origins of central banks explain how they came into existence. The forces sustaining and feeding their growth may differ from those explaining their origin.
Plans to abolish central banks constitute an extreme reform. It is doubtful that such plans can succeed without broader institutional change, occurring either first or simultaneously. That is likely true regardless of the strength of evidence on central bank performance. I examine these issues in what follows.
Commentary from the Blogger: Libertarians and a good amount of Republicans would very much like to see the Federal Reserve abolished. Unfortunately, it really isn’t that simple. Rather than try to go into detail in the manner that Mr. Driscoll has, I would just note that it certainly would be contingent upon what could be referred to as radical institutional changes. Of course, this could be a long-term prospect or goal if politicians were willing to engage in such an effort; however, that is very unlikely, which brings me to my next less-desirable option.
Radical change typically occurs during radical times, or rather during periods of crisis of failures of immense proportions. Certainly, this is how government and despots have been able to institute the policies and the institutions that they have. Yet, this does not prohibit us from having a dialogue, and of course, educating ourselves on the issues is what we are doing here. One this is certain, there will be no reform at all if the people do not understand what they are being asked to support. Makes sense, right?
– Richard D. Baris @RichBaris
Gerald P. O’Driscoll is a Senior Fellow at the Cato Institute.