Continuing Education... Lawrence H. White on Monetary Constitutions
By Amy Willis
This week’s episode was recorded before a live audience at the Cato Institute and featured GMU economist Lawrence White. The focus of the conversation was a new book edited by White offering suggestions for reform of the U.S. monetary system.
1. Approximately twenty minutes into the conversation, Roberts asks White about the ability of individuals to write (legally binding) contracts in alternative currencies, such as Bitcoin or gold. White replies such ability is “a little bit up in the air.” Should individuals be able to write contracts in alternative currencies? Explain. (Brush up on how Bitcoin works and the role trust plays in contracting in this episode with Bitcoin’s Andresen from last year.)
2. In discussing the Taylor Rule, Roberts says it evolved as a description of, rather than a prescription for, monetary policy. Revisit this Jeffrey Rogers Hummel Feature Article. What is the Taylor Rule, and why does Hummel argue it’s ineffective? How might Taylor respond? Listen to his discussion of the Taylor Rule, here.
3. Now it’s your turn to play monetary policy-maker. What should the government’s role be in the monetary supply? Nominal GDP targeting by the Fed, as EconLog’s Scott Sumner recommends? The Fed under the Taylor Rule? A gold standard? Or should the government step aside and let private suppliers create reliable money? Whatever you choose as your ideal, discuss the pluses and minuses of your approach relative to another.