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I don't think that's right. If you want to make sensible policy you have to understand your policy tools. Money and accounting are powerful policy tools, so you need to understand how the institutions in your economy react to them.

No. If you want to make sensible policy, you have to decide what sensible policy looks like, and make your policy aims clear, objective, and explicit.

You can't allow your tools to define that for you - which is what money and accounting do.

Economics is a political tradition. It's not a fact of nature. It's one particular proposed solution to one set of problems.

That it is illegal, in violation of good business practise or not remunerative.

That's a circular definition - apart from the "illegal" part. (And we know from Goldman etc that even that's up for debate.)

It doesn't examine what "not remunerative" means socially.

E.g. if a business is "remunerative" because it destroys other businesses and social networks, is that really a valid criterion for its continued existence?

But I've yet to see any evidence that properly run and supervised banks are sufficiently more corrupt, wasteful an incompetent than properly run and supervised politicians elsewhere in society.

If you accept that banking is essentially strategic planning - which I agree with, up to a point - it becomes inevitable that banks cannot remain supervised and accountable, because they're already at the top of the political food chain and are able to wrap it around themselves.

If banks and businesses are implicitly political, they should be explicitly democratically accountable.

If they're not democratically accountable, they have no business making policy.

Otherwise this:

Honesty and competence in your politicians: Accept no substitute.

is an impossibility.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Fri May 13th, 2011 at 05:38:58 AM EST
[ Parent ]
No. If you want to make sensible policy, you have to decide what sensible policy looks like, and make your policy aims clear, objective, and explicit.

Clear, objective, explicit. Pick any two.

You will always need to give your regulators some amount of discretionary power. Otherwise, you'll be playing a never-ending game of whack-a-mole with too-clever-by-half rules lawyers who move to the next exploit as soon as you close the previous one. The only way to deal with rules lawyers is to be clear and explicit, but not too objective.

You can't allow your tools to define that for you - which is what money and accounting do.

I know roughly what I want to do.

I want everybody to have the option of living in a reasonably functioning, technically sophisticated industrial society, where they are free from arbitrary violence (social, physical and economic).

But when I'm making policy proposals, I don't make them in terms of the end point I'd like to see. I make them in terms of the institutions and policy tools that actually exist and are available to policymakers, and check that they are consistent with the end point I'd like to see.

It doesn't examine what "not remunerative" means socially.

That's not a bug, that's a feature. I don't want banks to be making that decision, because I think that they're structurally inclined to make bad decisions in that area of policy. Parliament and civil society are much better places to make that decision.

E.g. if a business is "remunerative" because it destroys other businesses and social networks, is that really a valid criterion for its continued existence?

No, but then the solution is to make the business non-remunerative or non-legal. Banks enable business, they do not (or at least should not) run it. Or if, as is the case for certain intoxicants, this is impossible then at least tax the shit out of it.

If you accept that banking is essentially strategic planning - which I agree with, up to a point - it becomes inevitable that banks cannot remain supervised and accountable, because they're already at the top of the political food chain and are able to wrap it around themselves.

Well, if the (proper function of) the Civil Service is essentially strategic planning, which no-one of sound mind will presumably dispute, then couldn't you say the same thing for it?

If banks and businesses are implicitly political, they should be explicitly democratically accountable.

Yes. That's part of the point of giving the central bank a de facto veto over their political decision, and then making the central bank accountable to Parliament. As Jerome perspicaciously noted at the very beginning of this thread.

If they're not democratically accountable, they have no business making policy.

Yes and no. Courts are not democratically accountable in the conventional sense. Yet no sensible person would suppose that they are not making policy. And that is generally seen as desirable. Civil society organisations are not democratically accountable in the traditional organisation-flowchart-of-government sense either (and indeed the difference between "civil society organisation" and "special interest pressure group" is mostly whether you agree with them or not). Yet nobody could doubt that they make policy, and sometimes do it better than Parliament.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri May 13th, 2011 at 06:11:15 AM EST
[ Parent ]
Clear, objective, explicit. Pick any two.

Why?

I'm not talking about regulation. I'm talking about stating explicit political goals and monitoring progress towards them, or away from them.

Currently the banks have their cake, and they don't just eat it they sell it over and over.

They can state fuzzy goals like "low inflation", they can move the goal posts that define how inflation is calculated, they can enforce policy that is supposed to influence inflation, and they can shrug and say "Oops - we didn't see that coming" when that policy doesn't work.

Regulation isn't the problem here. Neoclassical brain rot is.

But when I'm making policy proposals, I don't make them in terms of the end point I'd like to see. I make them in terms of the institutions and policy tools that actually exist and are available to policymakers, and check that they are consistent with the end point I'd like to see.

And what happens when you not only don't get the policy you want, but you do get policies which are clearly destructive to the policy you want?

Well, if the (proper function of) the Civil Service is essentially strategic planning, which no-one of sound mind will presumably dispute, then couldn't you say the same thing for it?

No, because the proper function of the Civil Service is implementation, not strategy. It's not the job of the Civil Service to decide whether a high speed rail line should be built. It's the job of the Civil Service to try to get it built as cheaply and reliably as possible once the decision to build it has been made by ministers.

Yes and no. Courts are not democratically accountable in the conventional sense.

On most political science courses, courts are considered an explicit part of the machinery of government. If there's a constitution, the role of the courts is usually defined in it, typically on the basis of checks and balances. Voters don't elect judges, but there is a clear relationship between courts and elected houses.

Banks are not considered an explicit part of the machinery of government.

The original role of the Bank of England was coin counting and bill settling. It had no other function. Currently in most countries there is no explicit constitutional relationship between banks and the other parts of the government machine. The central bank may be mentioned, but the rest of the industry won't be.

And yet we find that banks - not just the central bank, but industry figures in general - have more influence on policy than voters, courts, elected assemblies or individual ministers.

So I'll say again: this should be considered a privilege, it should be made explicit, and if banks want to play the policy game the most useful thing a democracy can do is to define their role explicitly and make them explicitly accountable - not in the sense of being required to send a letter to the Chancellor, as the Bank of England currently is, and not in the sense of regulation, but in the sense of having the effectiveness and wisdom of their policy choices formally debated, questioned and tested in public - to destruction, if need be.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Fri May 13th, 2011 at 06:20:31 PM EST
[ Parent ]
I'm not talking about regulation. I'm talking about stating explicit political goals and monitoring progress towards them, or away from them.

Can you give an example of a clear, explicit and objective policy goal, and a clear, explicit and objective way to measure how it is attained?

Regulation isn't the problem here. Neoclassical brain rot is.

Neoclassical brain rot unfortunately produces inappropriate (lack of) regulation. And insane constitutional amendments. If it did not, it would not be a major problem. So if and when the neoclassical brain rot is purged, we must have workable policies to replace the neoclassically-inspired garbage that's been foisted upon us.

And what happens when you not only don't get the policy you want, but you do get policies which are clearly destructive to the policy you want?

Then I organise in a political party or a civil society organisation that can exercise useful amounts of power over decisionmaking and is broadly sympathetic to the policy I want. Or, if no such civil society organisation is available, I attempt to become A Very Serious Person so I can influence policy directly. I don't hold much hope at this point on either count, but one does not need hope in order to put up an honest fight.

But I can't do that until and unless I know what policy I want. Or rather I can, but then I'll get taken for a ride.

the proper function of the Civil Service is implementation, not strategy. It's not the job of the Civil Service to decide whether a high speed rail line should be built. It's the job of the Civil Service to try to get it built as cheaply and reliably as possible once the decision to build it has been made by ministers.

On the contrary. It is precisely the civil service's job to decide whether a given rail line should be built, given the government's overall fiscal and infrastructure policy. It is the minister's job to light a fire under the civil service to get them to produce reasonably coherent policy proposals on matters that interest him. And it is the minister's job to then reject, approve or decide between the proposals presented to him. But he has neither the staff, the training nor the institutional support to conduct serious strategic planning himself.

So I'll say again: this should be considered a privilege, it should be made explicit

I don't understand the need for private banks to be placed explicitly in the government chain of command. Private banks exist at the pleasure of the central bank and financial regulator - if the latter two so desire, they can pull the plug on any and all banks' business model almost literally overnight.

Make the central bank subservient to parliament, rather than this neoclassically-inspired "independent central bank" bullshit (which is in reality simply a bit of sophistry to avoid saying "bankster-run central bank"). Give it a financial stability mandate. And a clear and explicit standing order to use its big stick to beat any misbehaving private bank firmly about the head until it mends its ways or goes tits-up.

If you still have problems with misbehaving banks after that, we can start talking about constitutional amendments.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri May 13th, 2011 at 07:44:55 PM EST
[ Parent ]

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