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What do central banks do within an entangled system of political economy?

In: Rethinking Public Choice

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Abstract

Central banking is typically portrayed in aspirational and not realistic terms. This chapter reverses this portrayal by exploring how central banking can promote factional interests inside society. Central banking is typically portrayed as necessary to provide monetary stability. Setting clearing operations aside, someone who examines employment and spending by central banks would quickly recognize that it would take but a small staff to pursue monetary stability. As a realistic matter, a central bank will be supported so long as support for the bank dominates opposition to the bank. Within this simple observation lies a suggestive analytical program for pursuing an explanatory theory of central banking without invoking teleological concepts. Rather than serving as an instrument for promoting a general public good, it is surely more plausible to recognize that central banks through regulation and seigniorage promote the interests of dominant groups within society.

Suggested Citation

  • ., 2022. "What do central banks do within an entangled system of political economy?," Chapters, in: Rethinking Public Choice, chapter 10, pages 126-138, Edward Elgar Publishing.
    • Handle: RePEc:elg:eechap:21160_10
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