Money and Markets: Essays in Honor of Leland B. Yeager

The Virginia renaissance in political economy 41choices that may be made among alternative sets of rules. This program, latterlychristened as “constitutional political economy,” focuses on ultimate constitutionalchoices.The point to be made here is that there is much more intellectual linkage betweenthe initial Virginia emphasis on political economy, as described in the operationsboth of the economics department and the Thomas Jefferson Center, and modernconstitutional political economy than there is with public choice theory in its more“positive” or “scientific” aspects. From the outset, those of us who were instrumentalin putting together the Virginia program understood, even if vaguely andindirectly, that the ultimate objective to be sought in providing students with anexplanatory understanding of how a market order works is “constitutional” ratherthan strictly “scientific.” That is to say, economics is valuable because it enablescitizens to make more informed choices about the basic organizational structure ofsociety. In one sense the whole focus is on “welfare economics,” if broadly enoughdefined, and on the conditions under which markets fail and markets succeed,always by comparison with alternative political insti tutions. From this startingpoint, the emergence of the more positive research program that concentrates on“how politics works” was a natural consequence.Early on in this sort of inquiry into the “political economy,” as it was observed oras it might be, some identification of the necessary elements in the constitutionalframework for the operation of a market order was required. In this process, thecentral role of monetary rules and institutions becomes evident. How is the operationof a market economy affected by the existence of this or that set of monetaryinstitutions? And, perhaps more importantly, what are the comparative workingproperties of alternative sets of rules, alternative monetary constitutions?During his first year on the faculty at Virginia, Leland Yeager and I discussed therelevance and importance of these questions. And Yeager agreed to undertake theorganizational and administrative role in putting together a series of lectures, eachone of which was designed to present the argument for one of the several monetaryconstitutions or to analyze critically particular elements of such constitutions.Funds were raised specifically for this lecture series. And, during 1959, the lectureswere presented. 5 Under Yeager’s editorship, these lectures were published in 1962by Harvard University Press.This lecture series, and the book, were important for a reason that is independentof the precise content of any or all of the lectures themselves. The project signaled ashift of economists’ attention away from discussions concerning the direction andimpact of policy choices made within the existing structure of rules and by agentsduly authorized under such rules toward discussion of the structure itself. In otherwords, the emphasis was specifically constitutional. These lectures marked a return tosome of the earlier discussion in the 1930s by such economists as Irving Fisher andHenry Simons and by such politicians as Wright Patman, discussion that had fortoo long been superseded both by the Keynesian neglect of monetary influencesgenerally and by the implicit presumption that there were no institutional alternativesto Federal Reserve structure, as it existed.Unfortunately, the Virginia effort organized by Leland Yeager had little lasting