In a separate paper, I have called for the ‘constitutionalization’ of money. The events of 2008 demonstrated that markets will not work with money anarchy. Further, history tells us that politicization is not an effective alternative. We are left with the in-between prospect of establishing and enforcing a set of constitutional rules that will, on the one hand, limit the range and scope of disorderly anarchy, while, on the other, isolate the monetary sector from political efforts at manipulation.
Perhaps the most hopeful perspective involves an initial recognition that the objective is within the possible. There is no physical or psychological barrier that necessarily prevents the achievement of that which is commonly desired. The value of the monetary unit, the United States dollar in the setting of early twenty-first century, can, and must, be treated as a ‘relatively absolute absolute’. Along with the other required institutional changes, some of which are noted above, this value can be operative as an anchor for exchange transactions at all levels.
Thursday, February 11, 2010
In this mind-boggling article that appeared in the journal Perspectives in Moral Science, Economics Nobel winner James Buchanan explains the scientific failures of mainstream macroeconomics and proposes some new approaches, among them the "constitutionalization of money" (HT De Gustibus Non Est Disputandum):