Historical considerations, property rights, and budgets: A comment on the use of inputs by the Federal Reserve

Conclusion

When considered in an alternative historical setting with a property right perspective, the extended public choice model found in AMCD offers strong confirmation for the S-T view of monetary authority behavior.

In this light, a next step is to find an econometric specification that accounts for changing bureaucratic incentives within changing monetary regimes or constitutions. A rational expectations model of a bureaucratic Fed is beyond the scope of this comment. However, if a public choice approach to Fed behavior is to be useful, it must differentiate between variables, or the effects of variables, in a bureaucratic model relative to a model based on public service. For example, it is unclear how a significant debt variable in a static model of the monetary base supports or confirms a public choice view of the Fed. It is also possible that a public service oriented monetary authority could be motivated by national debt considerations. At least for now, Board employment appears to be a better public choice candidate. It is controllable by the central bankers and would be unimportant if the Fed was only interested in the public welfare.