There have been proposals to do this, but in practice I think getting rid of central bankers and replacing them entirely with programs would not work so well. The problem is you often need humans to react to unexpected situations—a financial crisis, for instance.
I think routine implementation of monetary policy could actually be largely automated if only there were CPI futures or NGDP futures available in sufficient liquidity. The central bank could subsidize the creation of these markets if they thought it to be necessary, but central banks are bureaucratic organizations and so generally don’t want to take actions that would limit their discretion.
For similar reasons, central banks often have a difficult time being seen as credible by market participants when they attempt to commit to some policy on a medium to long time horizon, as they really have no formal process which would bind them to a promise they had given years ago.
In theory, of course, you can also privatize money if you think market incentives and competition would result in more efficient money management. My guess is there would be a strong pressure for private monies to aggregate together until a small number of them accounted for most of transaction volume and money balances, and then the institutions managing them (which could e.g. be a consortium of banks) would still be faced with the same monetary policy problems that central banks are faced with today. Still, policy could improve if there were some mechanism for people to dump poorly managed monies and transact in better managed ones.
“Chinese officials forcibly detained one Federal Reserve Bank employee on four separate occasions during a 2019 trip to Shanghai, including at his hotel. Chinese officials threatened the individual’s family unless the individual provided them with economic information and assistance, allegedly tapped the employee’s phones and computers, and copied the contact information of other Federal Reserve officials”
Can we just fire these central bankers and replace them with a simple program? They are political operators rather than calculating economists.
There have been proposals to do this, but in practice I think getting rid of central bankers and replacing them entirely with programs would not work so well. The problem is you often need humans to react to unexpected situations—a financial crisis, for instance.
I think routine implementation of monetary policy could actually be largely automated if only there were CPI futures or NGDP futures available in sufficient liquidity. The central bank could subsidize the creation of these markets if they thought it to be necessary, but central banks are bureaucratic organizations and so generally don’t want to take actions that would limit their discretion.
For similar reasons, central banks often have a difficult time being seen as credible by market participants when they attempt to commit to some policy on a medium to long time horizon, as they really have no formal process which would bind them to a promise they had given years ago.
In theory, of course, you can also privatize money if you think market incentives and competition would result in more efficient money management. My guess is there would be a strong pressure for private monies to aggregate together until a small number of them accounted for most of transaction volume and money balances, and then the institutions managing them (which could e.g. be a consortium of banks) would still be faced with the same monetary policy problems that central banks are faced with today. Still, policy could improve if there were some mechanism for people to dump poorly managed monies and transact in better managed ones.
“Chinese officials forcibly detained one
Federal Reserve Bank employee on four separate occasions during a 2019 trip
to Shanghai, including at his hotel. Chinese officials threatened the
individual’s family unless the individual provided them with economic
information and assistance, allegedly tapped the employee’s phones and
computers, and copied the contact information of other Federal Reserve
officials”
from https://www.hsgac.senate.gov/imo/media/doc/HSGAC%20Report%20-%20China%20Threat%20to%20the%20Fed.pdf
If you replace them with an algorithm, with human intervention only in a president declared emergency , there wuld be no need for this stuff.