for release on delivery 1 : 00 p. m. edt november 1, 2019 friedrich hayek and the price system remarks by randal k. quarles vice chair for supervision board of governors of the federal reserve system at “ the road to serfdom at 75 : the future of classical liberalism and the free market ” ninth annual conference of the william f. buckley, jr., program at yale new haven, connecticut november 1, 2019 i am delighted to be back in new haven and particularly to be in the company of so many students interested in thinking rigorously about ideas. and i am honored to be participating in the william f. buckley, jr., program ’ s conference today on friedrich hayek and the future of classical liberalism. 1 over the course of this afternoon, you will hear a series of presentations that put hayek ’ s thinking in the context of contemporary developments and that offer a variety of perspectives on his intellectual legacy. hayek was a prolific — some might even say profligate — thinker. he was at various times, and in various modes, an early neuropsychologist, an epistemologist, a theoretical economist, a political philosopher, a moral philosopher, a philosopher of science, a historian of ideas, a public intellectual, and a social polemicist. this vast range has caused some to undervalue his contributions as an economist, notwithstanding his eventual nobel prize — when hayek moved to the united states in 1950, the university of chicago economics department would not hire him because, as milton friedman said, “ at that stage, he really wasn ’ t doing any economics, ” and paul krugman famously said that “ the hayek thing is almost entirely about politics, not economics. ” 2 others believe his broader thought, while seminal, was inconsistent across these various areas, and hayek himself never demonstrated how it all hung together. in my contribution to the discussion today, i want to examine a particular example of the lasting effect that hayek has had on economic thinking — one pertaining to the importance of freely determined prices for producing efficient economic all of my remarks today represent my own views, which do not necessarily represent those of the federal reserve board, the federal open market committee, or the financial stability board. i would like to thank ed nelson for his assistance in preparing these remarks. see, respectively, cassidy ( 2000 ) and krugman ( 2011 ). - 2outcomes — and consider how hayek

. the delors report, which was published in april 1989, contained concrete proposals to that end. according to delors, fixed and unchangeable exchange rates should be the core of emu. this implied a single monetary policy, to be conducted by a european central bank which had to ensure that domestic price stability would be maintained. the road to emu was to be completed in three stages which were, however, not subject to expiry dates. as did werner, delors thought that emu could be realised within a period of ten years. an important difference was that delors did not propose a transfer of national fiscal competences to the community. delors ’ plan had a sequel in june 1989, when it was agreed that an intergovernmental conference would be held to decide about the necessary amendments to the treaty of rome. six months later, the french - german proposal to hold a conference about political cooperation was accepted in dublin. at both conferences, preparations were made that led to the treaty on european union ( eu ) at the end of 1991, better known as the maastricht treaty. from the tensions that characterised the ems in the early 1990s, it seemed to be clear that the first stage of emu did not go entirely as planned. the uncertainties in countries such as denmark and the united kingdom which hesitated to sign the maastricht treaty, the interest - increasing effect of the unification of germany, and the fact that the exchange rates of some currencies had become overvalued since nyborg, culminated in august 1993 in the decision to broaden the fluctuation margins of the ems currencies from ± 2. 25 % to ± 15 %, except for the deutsche mark and the guilder which maintained the original margin of ± 2. 25 %. despite this setback, the european leaders were determined not to allow further delays on the road to emu mapped out by delors. this determination was also prompted by external circumstances which, contrary to the 1970s, now had a positive impact on developments. the collapse of the berlin wall in october 1989 ended the political division in europe. this opened the door to the reunification of east and west germany, of which the deutsche mark had meanwhile become the anchor of stability within the ems. these changes, which coincided with worldwide deregulation of capital transactions, increased the necessity of forming a front in western europe. at rapid pace, the member states of the community worked to realise the