Cato Policy Analysis No. 60 October 21, 1985

Policy Analysis

The Case for Free Banking:
Then and Now

by G. A. Selgin

G. A. Selgin is assistant professor of economics at George Mason University.

Executive Summary

There is today much frustration, not to say cynicism, regarding the operation of our monetary system. Theorists from all quarters agree that, in recent years especially, the Federal Reserve has seriously mismanaged the money supply. Some believe that the authorities have been inept; others think they are dishonest. And yet a third group regards the institution itself as incapable even in principle of fulfilling its self-assigned function. Probably the truth is a combination of these three views.

Whatever its foundation, the prevailing mood has bred numerous proposals for radical reform. All have in common the aim of reducing the influence of Federal Reserve officials over money, prices, and interest rates. Discussion centers less and less on such concepts as "scientific control" and "fine tuning." It is well enough, the proposals imply, if the Fed can merely be prevented from engaging in any more mischief.

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1985 The Cato Institute
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