Second, unemployment imposes heavy costs on individuals and the economy. Because the Fed lowers inflation primarily through lowering aggregate demand and employment, the more it seeks to stabilize inflation, the more it will destabilize employment in the short run. In addition, unemployed individuals suffer heavy losses. They suffer not only monetarily but also in terms of dignity, self-esteem, health, and forgone training. A third reason the Fed's mandate should include full employment is that central bankers tend to be inflation-averse and need to be prodded to take conditions other than inflation into account.
Monetary theory teaches that in the long run inflation is a monetary phenomenon.
Telling a central banker to focus on controlling inflation is like telling a defensive lineman to focus on tackling the quarterback. He will do that without advice. What is necessary is to tell him to watch also for a screen pass or a draw play. In the same way, it is necessary to tell a central banker to consider also unemployment and real economic activity. Some might argue that Alan Greenspan has been successful because he focuses on inflation and that this is the approach that should be encoded in legislation.