Tuesday, December 18, 2012

There Is No Technocracy: Bank of Japan Edition

. Tuesday, December 18, 2012

From the Telegraph:

"Its very rare for monetary policy to be the focus of an election. We campaigned on the need to beat deflation, and our argument has won strong support. I hope the Bank of Japan accepts the results and takes an appropriate decision," he said.

The menace behind his words did not have to be spelled out. He has already threatened to change the Bank of Japan’s governing law if it refuses to comply.
Political economists have not done a very good job of analyzing the political role of central banks and other "technocratic" institutions. We've spent most of our time looking for central bank independence how that conditions inflation outcomes, with a bias in favor of low inflation. But central bankers respond to the political environment in which they operate, have preferences of their own, and should therefore be treated as political actors.

Via Scott Sumner, who also notes:
In 2001 Argentine fans of the “currency board” learned that their policy regime was not as impregnable as they’d assumed. And in 1933 American supporters of the gold standard found that even the world’s largest monetary gold stock couldn’t prevent a devaluation under duress. The reason was the same in both cases—voters get the last word.  
On the 1930s see Beth Simmons, who persuasively argues that differences in political regimes conditioned choice of policies during the Depression. On Argentina I like Paul Blustein's account, which is journalism (not social science) but there's more real social science in it than many academic books.


There Is No Technocracy: Bank of Japan Edition
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