Aside from the debate about the Bank’s independence, who is on the MPC, the committee making the decisions? It is a collection of academic economists (of the conventional, mainstream variety), City and Treasury types. (Check them out)
Whose interests are known to be narrow.
Where is the input from the wider country and society? Business, local government, civil society et al, who know what is happening in the real economy and society, across the whole country. The Banks Agents provide some input but that is taken much less seriously than their models. The ones based on dubious maths, even more dubious assumptions and which have demonstrably failed.
I liken them to teenage boys who think that the real world is what they find on social media and computer games!
So regardless of independence, a major shake up of the MPC would make a big difference.
Thank you for highlighting the basic democratic deficit inherent in the MPC. Why should we allow such a powerful group, which makes decisions on who gets rich and who stays poor, to be stuffed with self-interested representatives of the elite? I object to that group being given the power to promote their own interests, in secret, with no accountability to the rest of us.
For sure: It's well and good to refer, if arguably not entirely defer, to specialists when executing policy; except here there is a dearth of dispute regarding the hegemony of the spurious economic orthodoxy which underpins this entire apparatus? But I'm heartened to see that recently, at least the two current main challengers to the left of Labour are listening to heterodox economists.
Thank you always for sharing your insights; for I'm avidly looking forward to reading this next book of yours!
Interesting piece, and I look forward to the book. But picking China and Singapore as the two exemplars is surely not helpful if you want to argue for how things should be done in a democracy....
I read it and couldn't have agreed more. The problem with the MPC is that they don't understand that economies are complex adaptive systems. They don't look for thresholds or feedback loops or uncertainty. The processes they have designed are far too rigid to accommodate the changing needs of an economy. I have my own plan for how to redesign the system which I'm about to publish, but it really all starts with understanding the feedback loops and spirals.
Pr Wren-Lewis writes long and convoluted screeds blaming centre-right politicians for the rise of the far right but he can't see how undemocratic and toxic an independent Bank of England is 🤦♂️ The idea that anyone still supports independent central banks after the experience of the last quarter century beggars believe.
You're spot on as usual Anne. The best way to end inflation would be to implement a 50% Discount/Rebate policy at retail sale. Why? Because retail sale is the single universally as in aggregatively participated in point in the entire economic process and as macro-economics is about aggregates that makes this policy automatically have macro-economic effect. Also, as retail sale is the terminal ending point of the economic process where production exits the economy and becomes consumption it is also the terminal expression point for all economic factors...like inflation for instance. Thus if by double entry bookkeeping and the 50% Discount/Rebate you can get $100 worth of groceries for $50, a $60k EV for $30k and a $500k house for $250k you've accomplished what every historical paradigm change has done and that is, totally inverted the present problematic anomalous temporal universe reality, which in this case is it transforms chronic erosive inflation into beneficial price and asset deflation. But wait! What is the retail point of Finance? Why your monthly automobile, mortgage or other large loan payment. So with the 50% Discount/Rebate policy you can actually integrate the present wholly exterior parasite to the actual productive process AKA Finance by having the central bank pay for 50% of your loan payment enabling you to get that EV for a payment equivalent of $15k and that $500k house for the equivalent loan payment of $125k. Lots of other policies that shore up some of the other gaming, destabilizing and unethical things that "free" market theoretics enable in my book which you can get here: https://www.amazon.com/Wisdomics-Gracenomics-New-Monetary-Paradigm-Policies-ebook/dp/B0C49B9PX7/ref=tmm_kin_swatch_0?_encoding=UTF8&qid=1552358772&sr=1-1-catcorr
I am interested in your argument but find it difficult to follow.
With regards to forecasts, eg inflation, do you think they are unnecessary or could be done better?
In what way do high UK interest rates bail out investors in other countries? If our interest rates go down, can’t they just put their money somewhere else?
For the green investment you have in mind, do we need to borrow from overseas investors?
What inflation is the UK is controlling when there is no full employment? And, even if there demand induced price increases, the Chinese,, the Vietnamese stands ready to fire the idle factories to supply the junk the UK imports.
“ But higher rates have depressed both private and public investment and, more broadly, the nation’s income. ”
I’ve always wondered over the application of higher interest rates in an environment where inflation signals a need to expand production. In that kind of environment you want to promote investment. So the logical answer is to make investment more expensive (doing!)
If there’s more money floating around in the economy, supposedly this wonderful robust undefeatable market system would find a way to absorb all that money. On the presumption that growth is infinite, and capitalism is capable of rising to any situation, why would there ever be inflation? … oh wait the perfect system is afflicted by government.
The fundamental problem being that orthodox economics only thinks of inflation being caused by too much money. I prefer Blair Fix’s characterization, inflation represents changes in social structure. It measures wealth consolidation.
"The fundamental problem being that orthodox economics only thinks of inflation being caused by too much money. "
Precisely. And that orthodoxy exposes the fact that "free" market theoretics isn't free at all. Why? Because in the human universe there is no such thing as TOTAL freedom, only freedom within known and enforceable barriers. Why? Because there's this little thing called ethics. Its why you can't walk into a theater and yell "FIRE!" Libertarians believe in TOTAL freedom and most other economic theorists (and even Steve Keen and Michael Hudson) have not cognited on this flawed theoretical framework let alone found a way to remedy the flaw.
"Free" market theory has no actual barriers to inflation and so is actually the absence of barriers AKA the unstable state of chaos. Put that together with the present monetary paradigm concept ENFORCED for the creation and distribution of all new money which is Debt Only and is it any surprise that Finance rules...and is the only business model to survive almost unscathed...from crises they originate?
The solution? The new monetary paradigm of Strategic Monetary Gifting implemented by a 50% Discount/Rebate policy at retail sale...and the rest of the freeing policy program that actually increases agent freedom and economic abundance by establishing known and enforcable barriers...within which freedom can actually be established.
I feel you need to take “regulatory capture” seriously. The Bank of England is probably captured to some extent already (via the technocrats), but if you remove the influence of technocrats, you don’t think the regulatory capture will be even worse?
Aside from the debate about the Bank’s independence, who is on the MPC, the committee making the decisions? It is a collection of academic economists (of the conventional, mainstream variety), City and Treasury types. (Check them out)
Whose interests are known to be narrow.
Where is the input from the wider country and society? Business, local government, civil society et al, who know what is happening in the real economy and society, across the whole country. The Banks Agents provide some input but that is taken much less seriously than their models. The ones based on dubious maths, even more dubious assumptions and which have demonstrably failed.
I liken them to teenage boys who think that the real world is what they find on social media and computer games!
So regardless of independence, a major shake up of the MPC would make a big difference.
Thank you for highlighting the basic democratic deficit inherent in the MPC. Why should we allow such a powerful group, which makes decisions on who gets rich and who stays poor, to be stuffed with self-interested representatives of the elite? I object to that group being given the power to promote their own interests, in secret, with no accountability to the rest of us.
For sure: It's well and good to refer, if arguably not entirely defer, to specialists when executing policy; except here there is a dearth of dispute regarding the hegemony of the spurious economic orthodoxy which underpins this entire apparatus? But I'm heartened to see that recently, at least the two current main challengers to the left of Labour are listening to heterodox economists.
Thank you always for sharing your insights; for I'm avidly looking forward to reading this next book of yours!
Interesting piece, and I look forward to the book. But picking China and Singapore as the two exemplars is surely not helpful if you want to argue for how things should be done in a democracy....
I read it and couldn't have agreed more. The problem with the MPC is that they don't understand that economies are complex adaptive systems. They don't look for thresholds or feedback loops or uncertainty. The processes they have designed are far too rigid to accommodate the changing needs of an economy. I have my own plan for how to redesign the system which I'm about to publish, but it really all starts with understanding the feedback loops and spirals.
Pr Wren-Lewis writes long and convoluted screeds blaming centre-right politicians for the rise of the far right but he can't see how undemocratic and toxic an independent Bank of England is 🤦♂️ The idea that anyone still supports independent central banks after the experience of the last quarter century beggars believe.
Pre-order in. Looking forward to it.
You're spot on as usual Anne. The best way to end inflation would be to implement a 50% Discount/Rebate policy at retail sale. Why? Because retail sale is the single universally as in aggregatively participated in point in the entire economic process and as macro-economics is about aggregates that makes this policy automatically have macro-economic effect. Also, as retail sale is the terminal ending point of the economic process where production exits the economy and becomes consumption it is also the terminal expression point for all economic factors...like inflation for instance. Thus if by double entry bookkeeping and the 50% Discount/Rebate you can get $100 worth of groceries for $50, a $60k EV for $30k and a $500k house for $250k you've accomplished what every historical paradigm change has done and that is, totally inverted the present problematic anomalous temporal universe reality, which in this case is it transforms chronic erosive inflation into beneficial price and asset deflation. But wait! What is the retail point of Finance? Why your monthly automobile, mortgage or other large loan payment. So with the 50% Discount/Rebate policy you can actually integrate the present wholly exterior parasite to the actual productive process AKA Finance by having the central bank pay for 50% of your loan payment enabling you to get that EV for a payment equivalent of $15k and that $500k house for the equivalent loan payment of $125k. Lots of other policies that shore up some of the other gaming, destabilizing and unethical things that "free" market theoretics enable in my book which you can get here: https://www.amazon.com/Wisdomics-Gracenomics-New-Monetary-Paradigm-Policies-ebook/dp/B0C49B9PX7/ref=tmm_kin_swatch_0?_encoding=UTF8&qid=1552358772&sr=1-1-catcorr
I am interested in your argument but find it difficult to follow.
With regards to forecasts, eg inflation, do you think they are unnecessary or could be done better?
In what way do high UK interest rates bail out investors in other countries? If our interest rates go down, can’t they just put their money somewhere else?
For the green investment you have in mind, do we need to borrow from overseas investors?
What inflation is the UK is controlling when there is no full employment? And, even if there demand induced price increases, the Chinese,, the Vietnamese stands ready to fire the idle factories to supply the junk the UK imports.
“ But higher rates have depressed both private and public investment and, more broadly, the nation’s income. ”
I’ve always wondered over the application of higher interest rates in an environment where inflation signals a need to expand production. In that kind of environment you want to promote investment. So the logical answer is to make investment more expensive (doing!)
If there’s more money floating around in the economy, supposedly this wonderful robust undefeatable market system would find a way to absorb all that money. On the presumption that growth is infinite, and capitalism is capable of rising to any situation, why would there ever be inflation? … oh wait the perfect system is afflicted by government.
The fundamental problem being that orthodox economics only thinks of inflation being caused by too much money. I prefer Blair Fix’s characterization, inflation represents changes in social structure. It measures wealth consolidation.
"The fundamental problem being that orthodox economics only thinks of inflation being caused by too much money. "
Precisely. And that orthodoxy exposes the fact that "free" market theoretics isn't free at all. Why? Because in the human universe there is no such thing as TOTAL freedom, only freedom within known and enforceable barriers. Why? Because there's this little thing called ethics. Its why you can't walk into a theater and yell "FIRE!" Libertarians believe in TOTAL freedom and most other economic theorists (and even Steve Keen and Michael Hudson) have not cognited on this flawed theoretical framework let alone found a way to remedy the flaw.
"Free" market theory has no actual barriers to inflation and so is actually the absence of barriers AKA the unstable state of chaos. Put that together with the present monetary paradigm concept ENFORCED for the creation and distribution of all new money which is Debt Only and is it any surprise that Finance rules...and is the only business model to survive almost unscathed...from crises they originate?
The solution? The new monetary paradigm of Strategic Monetary Gifting implemented by a 50% Discount/Rebate policy at retail sale...and the rest of the freeing policy program that actually increases agent freedom and economic abundance by establishing known and enforcable barriers...within which freedom can actually be established.
Bill Clinton famously remarked "it's the economy, stupid". That phrase needs a revision: "it's the economists (who are) stupid".
I feel you need to take “regulatory capture” seriously. The Bank of England is probably captured to some extent already (via the technocrats), but if you remove the influence of technocrats, you don’t think the regulatory capture will be even worse?