The Fed as a moral enterprise – a framework for decision-making

Abstract

Central bankers are currently rethinking the frameworks of monetary policy in light of the extreme disruptions and unprecedented policies of the Global Financial Crisis. The paper examines whether a rule based approach that incorporates moral considerations beyond economic utilitarianism could provide a more fair, effective and stable monetary system. It demonstrates that criticisms of Fed policies raise moral questions that reflect a widely held normative framework in the monetary arena. The paper abstracts from the criticisms and elaborates a pluralistic framework based in the work of moral philosopher W.D. Ross consisting of the basic duties of non-harm, beneficence, fidelity, justice, and reparation. It outlines a decision system that relies on moral intuition and strict attention to the facts to balance competing considerations and derive the duty to be followed in the particular circumstance.