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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.