Wednesday , January 29 2020
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Not entirely negative about Positive Money

Summary:
Positive Money and I have had an exchange of blog posts on FT’s Alphaville about their suggestions for what the successor to Mark Carney, Governor of the Bank of England, should and should not do. I remain deeply opposed to any move to get the Bank of England involved in climate change mitigation, or any attempt to interfere with credit allocation in pursuit of a policy to re-engineer industrial composition to suit that or other political objectives.  Likewise, we should not set the Bank objectives to target the level of inequality. However, I do think that having the debate is important and ultimately productive. It’s uncomfortable reading, and while the debate is happening, it feels like an unwanted increase in the probability that the central bank will be further politicized and

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Positive Money and I have had an exchange of blog posts on FT’s Alphaville about their suggestions for what the successor to Mark Carney, Governor of the Bank of England, should and should not do.

I remain deeply opposed to any move to get the Bank of England involved in climate change mitigation, or any attempt to interfere with credit allocation in pursuit of a policy to re-engineer industrial composition to suit that or other political objectives.  Likewise, we should not set the Bank objectives to target the level of inequality.

However, I do think that having the debate is important and ultimately productive.

It’s uncomfortable reading, and while the debate is happening, it feels like an unwanted increase in the probability that the central bank will be further politicized and the mandate broadened.

But in a democracy, the decision to hand over powers to an unelected, technocratic body, cannot be once made and never reviewed.

The credibility of monetary and financial policy ultimately rests on consent.  If it becomes apparent that the powers wielded aren’t consented to, then the suspicion will emerge that ultimately what people do want instead will come to pass, and people will not believe central bank promises.

This consent has to be continuously sought.  A key means of doing this, obviously is public debate.  Attempting to actively avoid and suppress such debate risks making it seem like the mandate is designed in opposition to the interests of those whose consent one needs.

Of course, echoing my own theme about what the Bank of England should and should not do, renewing this consent and fuelling the debate is not the job of the Bank!  (A reason why I am uncomfortable about exercises like the Citizens’ Panel, which seems to sponsor debate in this area.)  The Bank’s job is to do what it has been told and no more.

But it is the job of Governments and civil society at large.  So, although I don’t agree with much of Positive Money’s proposals, I welcome their letter and the conversation it provokes.

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Tony Yates
Economist. Consulting, lecturing, a book. Ex Prof at Bham, Ex BoE staffer. Macro, policy, monetary econ, occasional nonsense.

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