【正文】 $. Moreover, these costs have been falling over time since the advent of calculators made mental multiplication and division lessimportant tasks for everyday travelers, and they will continue to fall as new technologies provide and process information for us. Friedman’ s DaylightSavingTime Argument Friedman’s daylight savingtime argument is likely to involve larger costs and benefits. Just as it is easier to reset clocks than to reset the times of every daily activity, it is easier for the exchange rate to respond to changes in underlying conditions than for the overall nominal price level to respond, with all the acpanying real disruptions. The main objection to Friedman’s argument is that we do not know if the market response will “get it right” — will the exchange rate adjust to the new equilibrium level? The honest answer, of course, is “Who knows?” Economists don’t yet have a model of exchange rates with much 5 empirical support. But is no change at all in the exchange rate likely to be better? Again, no one really knows, and current evidence is vastly insufficient to provide a good answer. Whatever that answer, flexibility, such as labor mobility, capital mobility, financial mobility, absence of laws and regulations that hinder flexibility (such as laws making it difficult to fire people, or raising the costs of hiring new workers) has considerable benefits. The greater overall flexibility, the less likely any exchange rate system will have a major effect on human welfare, unless that system leads to a major crisis. Institutional and Political Economy Issues Since the middle of the 20th century, the focus of serious discussion on exchange rate systems has shifted from the issues outlined thus far to questions about credibility of moary (and other) policies, alternative mitment mechanisms for policymakers, the stability and strength of financial systems, and mechanismdesign issues— that is, the design of institutions and politicaleconomy issues. Some of the issues are old. Flexible exchange rates provide the option for a nation to pursue its own moary policies. Whether that option is a benefit or curse depends on factors such as how political forces operate within the nation’s institutions to affect its policies. The corresponding benefit of a fixed exchange rate system is that it constrains moary policy. Of course, if a nation wants constraints— and has the political will to impose them on itself— it has other options available that it could pursue under a system of floating exchange rates (such as constitutional rules on policy, institutional changes, and so on). A fixed exchange rate system (like these other options) may provide (future) mitment as well as a (current) constraint. However, there are many ways to mit. Certainly there is little reason to believe that a 6 policy of pegging the exchange rate is more credible than alternative institutional arrangements such as independent central banks, currency boards, payment systems that reward or penalize central bankers for economic outes, or constitutional requirements for centralbank actions or performance. Some of these may entail greater credibility than pegging an exchange rate (which history shows clearly not to be credible). Do Floating Exchange Rates Cause Variability, Uncertainty, and Risks? Flexible exchange rates are often accused of creating variability, uncertainty, and risk. But from where do these alleged evils really arise? Unstable underlying conditions or policies may create variability and risks that appear in exchange rate movements when the exchange rate is free to move, but are channeled elsewhere when they are fixed. If unstable speculators are responsible for these risks, does a policy of pegging the exchange rate remove these speculators from the economy, or merely turn them in different directions? That is, fixed exchange rates may not provide true insulation from speculative bubbles. Instead, the sources of those bubbles may simply seek other outlets. Of course, exchange rates do vary daily under a floating rate system. But international financial markets have developed to allow firms the opportunity to hedge risks associated with these changes. The same opportunities, unfortunately, are not usually available for hedging the risks of speculative attacks and devaluations under pegged exchange rate systems. Nor are they available for hedging the risks associated with various government policy responses (such as regulations and controls on international trade in goods, services, and financial assets) to threats of speculative attacks. Consequently, floating exchange rates may present less risk than tenuously pegged rates. 7 The Issue of Misalignment Experiences with floating exchange rates in recent decades have led to the concern that floating exchange rates often bee “misaligned” beca