Economic ideas, the monetary order and the uneasy case for policy rules

The problems posed by monetary policy cannot be successfully addressed by legislating enduring policy rules. With the passage of time, economic understanding does not systematically converge ever more closely on a “true” model of the economy, a process which is now sufficiently far along that our current ideas can form the basis for designing such measures. Rather, ideas evolve unsteadily and unpredictably, and disagreement about them is routine. They influence the behaviour of the economy and they are influenced by it as they develop, requiring policy principles to adapt as well. Monetary policy problems thus cannot be solved once and for all, but must be coped with continuously.