Foreword

Almost every word in Jorge Luis Borges’s description of a man who cannot forget anything carries advice for those who want to learn from the past rather than merely chronicle it.

The title of this volume states its ambition and reveals its origin. Milton Friedman’s famous history of the United States was monetary and so were many histories of other countries that it inspired. The work remains a classic, and this volume pays it due homage in inspiration and in method. The editors and authors are moved by a deep concern that prosperity has eluded Latin America and by a strong suspicion that macroeconomic policies are in part to blame.

The question is complex, and the first task is to assemble and organize the evidence. The contributors to this volume do so as social scientists, guided by theory but not blinded by it. As with Friedman, the work remains a history in which theory suggests what facts to look for and how to organize them. The process is one of selection and simplification, to make the world less multiform. But it cannot be one of reduction or obliteration: the goal is to bring the picture down to a tolerable level of precision and make the world less instantaneous.

As social scientists, we must believe that there is both accumulation and progress in ideas. The theory that guides this project shares deep insights with Friedman’s work but also relies on what economists have developed in the decades since. This is a monetary and fiscal history. The government’s budget constraint, a simple but powerful equation (if its terms are properly defined and measured), was imposed on each chapter. In that constraint, the title’s two adjectives are yoked, and it becomes impossible to see one without looking for the other. This volume demonstrates how fruitful is that discipline, if sensibly abided.

At this stage, however, imposing more structure would be unwise. The facts do not speak for themselves, but they must speak first. Other ideas must be in our minds as we read this history, as themes ready to fall into consonance with it at various turns: uncertainty and how agents deal with it, the expectations or beliefs they form, the nature and timing of debt obligations, multiple equilibria lurking in the background. The introductory chapters should be carefully rehearsed and our minds readied.

Writing a monetary and fiscal history is in itself a first. But writing that of a continent? The project’s leaders believe that, multiform as they are, the countries of Latin America are similar enough that their dissimilar histories will be revealing. Macroeconomists don’t run experiments, quasi or otherwise: they spot patterns. When formulated with the underlying rigor of theory, the patterns can be described and shown to others. Then, even if we remain spectators, we need not be solitary.

But we want to be more than spectators. The editors’ and authors’ deep concern over the past is also a project for a better future, and their suspicion about policy’s past role is also optimism about its future role. As social scientists, we must hope that ideas lead to progress in outcomes, even if learning from history makes us wonder at times how much learning shapes history.

François R. Velde

Federal Reserve Bank of Chicago

March 2019

The views presented here do not necessarily reflect those of the Federal Reserve of Chicago or the Federal Reserve System.