36 Cato J. 279 (2016)
Real and Pseudo Monetary Rules

handle is hein.journals/catoj36 and id is 295 raw text is: 











     REAL AND PSEUDO MONETARY RULES
                      George Selgin

   Milton Friedman is perhaps the best-known exponent of mone-
tary rules. He also wrote a well-known paper entitled Real and
Pseudo Gold Standards (Friedman 1961). I wish here to pay twofold
homage to Friedman by insisting on a distinction between real and
pseudo monetary rules. Just as Friedman (1961: 67) maintained that,
though they may have many surface features in common, real and
pseudo gold standards are at bottom findamentally different,
I shall argue that despite their superficial resemblance, real and
pseudo monetary rules are findamentally different-both in their
operation and their consequences. Indeed, I shall argue that what
Friedman called a pseudo gold standard is really an instance of a
pseudo monetary rile, while what he calls a real gold standard is an
instance of a real monetary rile.

Real Monetary Rules
   A monetary rile, as typically defined, encompasses two very dif-
ferent sets of possibilities. For example, Froyen and Guender (2012:
101) define a monetary rule as a prescribed guide for the conduct of
monetary policy. That broad definition includes both what I
consider rules in the strict sense of the term-what I shall call real
monetary rules-and rules in a much looser sense, which I consider
to be pseudo monetary rules.



   Cato Jounal, Vol. 36, No. 2 (Spring/Summer 2016). Copyright  Cato Institute.
All rights reserved.
   George Selgin is a Senior Fellow and Director of the Center for Monetary and
Financial Alternatives at the Cato Institute. He is also Professor Emeritus of
Economics at the University of Georgia.

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