A quick reaction to Andrew Haldane’s latest speech, released this morning. After a great survey of the literature on behavioural econ and finance, and economic psychology, he says:
“The Bank is about to embark on what will be, in the area of research, a cultural revolution. To caricature slightly, Bank research in the past was typically used to nourish and support the Bank’s policy thinking and framework. Relatively rarely was it used to challenge that prevailing policy orthodoxy, at least in public.
That is about to change. As part of its strategic plan, the Bank has decided to cut the umbilical cord. In future, it will carry out, and publish externally, research covering the whole waterfront of policy issues it faces, monetary, financial and regulatory. Through new publications, we will put into the public domain research and analysis which as often challenges as supports the prevailing policy orthodoxy on certain key issues.”
If Andy Haldane’s speech announces a relaxation of what was, in essence, a regime of censorship, then it is to be very much welcomed. In my day there was a clear understanding by those doing research that results or prescriptions that contradicted policy or policy frameworks would not make it to publication stage. Most, but not all, of the time, actual censorship was avoided, so such policy-challenging research rarely got undertaken in the first place, self-censorship being the rational response of anyone who wanted to build up a cv of publications to give themselves an outside option. Relaxing this practice will bring the BoE more into line with the ECB, Fed and other central bank research paper series, which regularly publish results that challenge their policymakers’ views.
That said, this is going to be a great case of the poacher announcing he was turning gamekeeper. Despite the confidence he had in expressing his own dissents from Bank of England lines in his speeches, in my view Andy himself was one of the more stringent and risk-averse enforcers of the research content regime when heading up Financial Stability.
We must also look forward to finding out how the cultural revolution is going to happen. Researchers already felt, rightly or wrongly, beleaguered, isolated, and discriminated against in the promotion stakes. Only the most indifferent or saintly could ignore the incentives to curry favour with policymakers or senior managers by being supportive. Andy’s call to arms will help a lot. But Andy may not be there forever himself, or at least not in that job as Chief Economist, so the cultural revolution will need more than his words to make it self-sustaining.