Central banks blogging

The Bank of England has launched a new staff blog, and the fact of the blog –  rather than the initial content –  has attracted some attention.  The Bank of England summarises its aim this way:

Bank Underground is a blog for Bank of England staff to share views that challenge – or support – prevailing policy orthodoxies. The views expressed here are those of the authors, and are not necessarily those of the Bank of England or its policy committees.

Tony Yates, a former BOE staffer, seems surprisingly optimistic.

There is a growing number of ex central bank bloggers, eminent (Bernanke) or otherwise, but central bank blogs are uncommon, if not entirely new.  The New York Fed has been running the Liberty Street Economics blog for a while, and Macroblog at the Atlanta Fed has been around for even longer.  At a supranational level, there is the iMFdirect blog.

But a blog is just a technology, one of many “communications channel” that central banks, as powerful public institutions can use.   The interesting point is the suggestion that the BOE blog will be a vehicle in which staff can “share views that challenge –  or support –  prevailing orthodoxies”.

That certainly would represent quite a change for most central banks.  But again, it is along a spectrum.  Many/most central banks have long published research and discussion paper series, which typically carry a disclaimer that the views were those of the authors and not necessarily those of the institution (at the Reserve Bank, we drew a strong distinction between Bulletin articles which carried no disclaimer, and thus could be taken as, in some sense, the views of the Bank, and other papers). Central bank analysts and researchers give conference papers, dealing with a variety of technical or policy issues, which carry similar disclaimers.  And not that many years ago, I heard Janet Yellen, then only vice-chair of the Fed, give a speech at a conference, and that speech also carried the standard disclaimer[1].

But the truth is that most central banks –  and I’m sure other government agencies, even those with operational independence, are no different –  typically have quite strict, but not always clear (to themselves or staff), limits to what staff are allowed to say in such documents or papers.   I’m still somewhat surprised, and impressed, that senior Fed researcher Robert Hetzel has been able to publish major books carefully (but critically) reviewing the Fed’s conduct of monetary policy.  Perhaps it is an advantage to be a very big but decentralised central banking system.

Tony Yates gives some of the flavour of this (historically quite tight) control in a BOE context, and I have also heard some BOE horror stories from people who used to work there.  It will be interesting to watch the BOE experiment, but I suspect it will end up being a channel primarily for the sorts of pieces on the blog today –  one on a topic not related to the Bank’s responsibilities at all, and one a nice, but anodyne, piece of analysis illuminating the rather obvious point that risks of deflation rise if shocks happen when conventional monetary policy has reached its limit.

And that is fine.  Openness and transparency in powerful public agencies are important, and there is far too little of both.  But the ability to have robust debate within an organisation in the formative stages of policy development is also important.   Great leaders can probably cope with challenge and scrutiny wherever it comes from, but on average we have to expect average leaders.  Often enough, they will feel threatened if someone down the organisation is being used by external critics to bash the organisation.  I’ve mentioned earlier how Graeme Wheeler got the Ombudsman to block release of a discussion note I had written, some time previously, on governance issues.    I think he was worried that the Green Party –  who have championed the cause of reform and greater transparency at the Reserve Bank –  would use my note to “politicise the issue” [aren’t institutional design and governance issues appropriately political choices?] and to undermine his own preferred approach to reform.

In many ways, a central bank blog is not much different than what we were trying to do at the Reserve Bank when we set up the Analytical Notes series a few years ago (a product I edited) –  or the Fed’s FEDS Notes series.  Our idea was that analytical pieces, that weren’t heading for journal publication, could be published, carrying a disclaimer that they were the views of individuals not the Bank.  Since any of this material would have been discoverable under the OIA, it was thought good for openness, and for staff themselves, to have a vehicle for putting such material in the public domain.  Sometimes it was actively used by the institution to get supporting material out for scrutiny.  There are quite a few interesting papers in this series, and I’ve already linked to several of them, but I’m pretty sure there was nothing in them that challenged current orthodoxies.  Prone to challenge orthodoxy as I was personally, I was pretty good at judging what could be got out the door, and phrasing things accordingly.

I’m not suggesting that the Reserve Bank has typically been a monolith in how staff participated in external events.  We hosted, with Treasury, an exchange rate policy forum a couple of years ago  –  to which a range of business and other people were invited.   All the papers were published with no “censorship” (at least for the Reserve Bank ones) and are still on official websites.  My paper involved a fairly critical perspective on New Zealand’s immigration policy and the potential adverse macroeconomic implications (not, of course, that the Reserve Bank is responsible for immigration policy).  I’ve given discussant comments at international central banking conferences casting doubt on the benefits of publishing extensive central bank forecasts, and have a chapter in a recent (fairly obscure) book suggesting, with all sorts of caveats, that we should not automatically think of inflation targeting as the ‘end of history’ (although this did prompt efforts at censorship by one new Deputy Governor).

But all that is different from whether staff should be able to question, in public, current policy preferences and frameworks.  Much as I think the Governor’s LVR policies are unnecessary, inappropriate and costly, I really don’t see that it is appropriate, or in the interests of good government processes, for staff to be saying so, even with all the qualifications in the world, in public fora.  And I’ve thought the Governor’s monetary policy decisions over the last few years were wrong, but no matter how carefully crafted the argument was, it wouldn’t have been appropriate to run that argument in public as a staff member.  In fact, I did a variety of speaking engagements in which I persuasively made the case for the Governor’s stance.  That was the external-facing bit of the job.  And rightly so.

Perhaps in some idealised world all debate could or should be open –  Tom Scott once ran a cartoon satirising Don Brash’s commitment to open comment and suggesting Don would have liked to broadcast all monetary policy deliberations live  –  but it isn’t the world we live in.  Organisations need to be able to have robust debate internally, without the sense of a simultaneous parallel track being pursued externally by people who happen to disagree on a particular issue.  And as I listen to accounts of people reluctant to comment on this or that issue because, for example, it might affect their future consulting opportunities, it is a reminder of why it is not a realistic alternative vision.

Now, I’m quite sure the Bank of England has no intention of allowing that level of dissent or openness either.  Perhaps pieces that “challenge current current orthodoxies” will be published when Mark Carney or Andy Haldane themselves want to challenge such “orthodoxies”, but it will be a surprise if we see pieces directly challenging views advanced by those senior managers.  The blog might also be used actively at times as a place for testing the waterr –  putting an idea or some analysis out, in a controlled way, but with some plausible deniability (‘it was just the author’s view”).

I’m not critical of that approach.  If I have a criticism, it is that perhaps the Bank of England is overselling what the blog can be.  If it can be a vehicle for some shorter and more informal pieces of analysis, or for translating into English some of the more technical working papers, it will probably serve a useful purpose.  And its existence is something of a “brand marker” –  the Bank’s current management wanting to mark itself out from the past.

In the end, there are always going to be judgements about the appropriate level of openness.  It will depend on the person, the issue, and even the specific external environment.  For some issues, treated in some ways, at some times, senior management will be comfortable with alternative perspectives (perhaps even quite critical, but well-argued, ones) from staff being published.  On other issues, the market or political sensitivities just make it unrealistic.

There are delicate balances to be struck.  For example, if central banks want to have and retain top-flight researchers there needs to be a reasonable commitment to a willingness to publish.  And a willingness to publish a range of views can help signal a general openness to challenge and the contest of ideas.  And engagement with alternative perspectives –  genuine engagement, not just an evangelisation exercise –  is important.  But robust internal debate –  with ex post scrutiny and document discovery –  remains far more important to well-functioning central banks.  Central banks, and those holding them to account, should be much more concerned to establish that those processes and cultures are in place.  In my observation and experience, that increasingly has not been the case at the Reserve Bank of New Zealand.

[1] It struck me at the time, because at much the same time the Reserve Bank Communications Department was trying to insist that we should not use the disclaimer in any presentation, on the grounds that when anyone was speaking anywhere they were speaking “for the Bank”.