Racial Equity Is Beyond the Fed ’s Scope

ConclusionAdding a new mandate that requires the Fed to eliminate economic disparities across racial and ethnic groups —and achieve “economic justice”—is impractical, unconstitutional, and a threat to what Hayek calls the“central concept of liberalism,” namely:That under the enforcement of universal rules of just conduct, protecting a recognizable private domain of individuals, a spontaneous order of human activities of much greater complexity will form itself than could ever be produced by deliberate arrangement, and that in consequence the coercive activities of government should be limited to the enforcement of such rules.The first rule for setting goals for any institution is that they are realizable —and that applies to the Fed. AsCharles Plosser, former president and CEO of the Federal Reserve Bank of Philadelphia, writes, “When establishing the longer-term goals and objectives for any organization, and particularly one that serves the public, it is important that the goals be achievable. Assigning unachievable goals to organizations is a recipe for failure.”The Fed has never placed a precise number on its maximum employment goal because it is generally recognized that the Fed can only impact nominal variables and that nonmonetary factors play the key role in determining the natural (long-run equilibrium) rate of unemployment, which itself is not directly knowable. Thus, in its“Statement on Longer-Run Goals and Monetary Policy Strategy,” the Federa...
Source: Cato-at-liberty - Category: American Health Authors: Source Type: blogs