It Depends Why You're Using the Word "Why"

Gabriel M. makes a good point about John Stewart's and Greg Mankiw's question, "Why do we have a Fed?" The answer not only depends (as I argued) on what alternative you have in mind; it also depends on what you mean by "why." The question can mean, "Why is it a good idea to have a Fed?" (Gabriel's answer: it's not. Obviously I disagree.) Or it can mean, "How did it come about that we have a Fed?" Only under a very optimistic view of history are the two questions equivalent. I would personally argue that the reasons given at the time for establishing the Fed were (approximately) valid and remain (approximately) valid today. But even with my relatively sanguine view of quasigovernmental institutions, I have to acknowledge both that the Fed's founders may have had ulterior motives and that the rationale they gave proved quite imperfect in many respects.


UPDATE: In a comment, Gabriel indicates that his answer to "Why is it a good idea to have a Fed?" is not as extreme as I stated above.