Are you a technocrats or a politician? If you listen to central banks, they will say they are just technocrats or experts who do not engage in politics. To discuss political implications of policy or have politicians involved in the discussion is an infringement on a central banker's cherished independence. Only through independence and limited oversight can central banks do their sacred technical work.
More overt discussion of politics will impact central bank behavior. There will be a biases when pandering to voters. This may be a bias toward inflation for the debtor class, or dovish policies that favor full employment.
A central bank may have inflation and employment mandates, but central bankers, as a tribe, do not want outsiders overseeing or critically evaluating this process. Nevertheless, central banks are inherently political given their policies have strong distributional effects on the economy and citizens. There are choices to be made that will affect all citizens. There are trade-offs that move beyond the simple idea that a technocrat is trying to fine-tune policy instruments to hit some economic target.
Annelise Riles, an anthropologist and legal scholar who has focused on ethnographic research, has written a provocative book by taking a different perspective on central bank behavior. She explains the central bankers through an anthropological lens. These central bank experts form a community with social relationships which are outside the norms of the rest of society.
Central bankers have more in common with other central bankers and not the average citizens in the country where they work. Their success is gauged by their peers around the world and not by the average citizens they serve. Everyone leading player from the central bank tribe is likely to be a PhD economist and is steeped in the macroeconomic speak. They like their autonomy so they can focus on their community with little oversight by those outside their social network.
As we end the year with one more Fed meeting and growing focus on the number of rate changes in 2019, we should at least be aware of the disconnect between the tribe of central bankers and the rest of the economy and financial community. The focus of central bankers on quantitative tightening, normalization, forward guidance, rate mechanics, and bank regulation can be far afield from many who are interested in real wages and wealth accumulation for retirement. Monetary technocrats may be insensitive to the distributional effects of policy not only in their countries but around the globe. This is not a call for any specific policy but a greater awareness by central bankers of the indented and unintended impact of their actions.
A central bank may have inflation and employment mandates, but central bankers, as a tribe, do not want outsiders overseeing or critically evaluating this process. Nevertheless, central banks are inherently political given their policies have strong distributional effects on the economy and citizens. There are choices to be made that will affect all citizens. There are trade-offs that move beyond the simple idea that a technocrat is trying to fine-tune policy instruments to hit some economic target.
Annelise Riles, an anthropologist and legal scholar who has focused on ethnographic research, has written a provocative book by taking a different perspective on central bank behavior. She explains the central bankers through an anthropological lens. These central bank experts form a community with social relationships which are outside the norms of the rest of society.
As we end the year with one more Fed meeting and growing focus on the number of rate changes in 2019, we should at least be aware of the disconnect between the tribe of central bankers and the rest of the economy and financial community. The focus of central bankers on quantitative tightening, normalization, forward guidance, rate mechanics, and bank regulation can be far afield from many who are interested in real wages and wealth accumulation for retirement. Monetary technocrats may be insensitive to the distributional effects of policy not only in their countries but around the globe. This is not a call for any specific policy but a greater awareness by central bankers of the indented and unintended impact of their actions.
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