Is Central Banking Central Planning? Hayek vs. …Hayek?

Is money a form of “natural monopoly” that will always be centralized for efficiency reasons, or are our current central banks in business due only to government protection?  Is government involvement with money incompatible with 19th-centrury Liberalism?  Is it “central planning” if it isn’t comprehensive, or is money so important to a free economy that control of it constitutes “planning” on its own?  Are “Socialism” and “central planning” the same thing, or is central planning only such when it is in service of full-blown socialism, i.e. the total control of the economy by the State.  Kurt Schuler and David Glasner spar on the topic:

The first and second posts by Glasner in which he argues that “whatever its faults and mistakes, [its "many sins of commission and omission over the years"] hardly makes the Fed a central planning agency,” and then cites Hayek from The Road to Serfdom and The Constitution of Liberty to bolster his claim.

Schuler’s reply to Glasner.  “Central banks are government monopolies that consciously try to steer the economy. If that is not central planning, nothing is. (And by the way, it will not do to cite the younger Hayek in support of central banking when the older Hayek in Denationalisation of Money wrote about “the obvious corollary that the abolition of the government issue of money should involve also the disappearance of central banks as we know them” [page 105].)”

Glasner’s reply to Schuler:  “Central planning in this sense is much different from what a central banker, even under the most expansive view of his responsibilities, is trying to do.  Obviously a central banker is engaged in planning, in the sense that a central banker is trying to act in a rational way calculated to achieve his purposes.  The ambiguity in the meaning of planning has long been recognized, and dismissed by critics of central planning.  Only planning designed to override the voluntary decisions and plans of private individuals and business, compelling them to conform to the central plan rather than to their own preferred courses of action, is planning of the objectionable type.  So just because a central banker has a centralized role in the banking system, and seeks to achieve his goals in a rational, planned, non-random way, does not establish ipso facto that his planning is necessarily objectionable in the same way that planning by a central planner is objectionable, inasmuch as central bankers typically do not aim to achieve any particular allocation of society’s resources.  Rather the goal of the central banker is to create the macroeconomic conditions in which people can succeed in executing their own economic plans to buy and sell, save and invest, produce and consume.”

Schuler’s follow-up:  “We can agree that central banks are run by intelligent people who have good intentions. We can debate whether there is some element of natural monopoly in money that means certain tasks are better done by a central planner than by competitive markets. (If it really is a natural monopoly, why does the law need to forbid competitors?) It should be evident, though, that central banking is indeed a kind of central planning.”

Essentially, Glasner’s point is that central planning must be COMPLETE to be central planning; if there is still scope for personal decision making, then the planning hasn’t been “centralized.”  He states: “But, whatever its faults and mistakes, that hardly makes the Fed a central planning agency.  And there is something disreputable about using a term like “central planning,” with its overtones of totalitarian domination and suppression of individual rights, as a rhetorical bludgeon with which to beat up a person or an institution with whom you have a policy disagreement.”

Glasner is apparently unaware that people have been prosecuted and jailed for using alternative currencies in the United States since the creation of the Fed and its monopolization of money creation.  If the Federal Government  isn’t centrally planning the money supply it wouldn’t feel the need to suppress competition that may… disrupt its plans.

As I read Glasner’s position, though, I can’t help but come to the realization that no one could be a central planner under his terms unless they had complete and utter control of the all aspects of the economy; surely he wouldn’t be so cavalier if he knew Americans were indeed being “bludgeoned” for privately implementing a policy of sound money.

Is this just a disagreement over the term “central planner,” which Glasner just thinks is too strong a word?  Or does he really see the current system as free because it is not totally controlled?   After all, he defines planning as only “attempts to allocate the resources available to society in accord with a pre-determined unitary ‘rational’ plan rather than allow resources to be allocated according to the decisions of individuals advancing their own self-interest through market transactions,” yet he doesn’t see the Federal Government’s Federal Reserve system as “attempt[ing] to allocate the (money supply) resources available to society,” as having a “pre-determined … ‘rational’ plan,” or [dis-]allowing resources to be allocated according to the decisions of individual advancing their own self-interest through market transactions.”  So quiet yourselves about the fear of gradual, step-by-step control of the economy, starting with it’s most important tool – the money- and progressing through the regulation of all economic activities.  He seems to include the word “unitary” in his definition to rule out anything as “central planning” that is not controlled by one mind, and is all-encompassing.  It’s not central planning unless it’s ALL centrally planned.  Who, then, has actually attempted central planning by this definition?

First they came for the users of sound money, and I didn’t speak out because they still let me decide if I would like my twenty-dollar Federal Reserve note redeemed in two ten-dollar Federal Reserve notes, or four fives…

Essentially Glasner, who works for the FTC, sees no problem with “intervention” by people, representing a “central authority” (the Federal Government), whose “plan” is to have their economy have a stable price level and low levels of unemployment (this would not be the “plan” of the free market, but possibly a byproduct).  Now, this is claimed not to be “central planning” because their plan, developed and coordinated centrally,  is only to create certain conditions the maintenance of which require the suppression and usurpation of individual, dispersed plans.  I fully agree with Glasner that words, to be useful, should keep their meaning.  And if he is convinced that the term “central planner” is accurate only in the extreme case of e.g. the Soviet Union (though there were conflicting plans there, so maybe not), he is entitled to defend that position.  But in the same manner that the Federal Reserve promotes and protects freedom of individual monetary planning, as Glasner suggests, we here at Soundmoneyproject.org seek to defend the freedom of individual literary planning.  In that vein, our agents will be arriving at Mr. Glasner’s office shortly to prosecute him for “making, possessing and selling his own [ideas].”  We wouldn’t want any competition messing with our plans!

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