Justice Everywhere

a blog about philosophy in public affairs

Author: Peter Dietsch

More equal compared to what? How central banks are fudging the issue on inequality

Since the financial crisis of 2007, central banks have become the central tool of macroeconomic management, being described as the “only game in town.” To avert financial meltdown and, subsequently, to stimulate the economy, they have launched unconventional monetary policies such as quantitative easing (QE). The latter injects huge amounts of liquidity into the economy through large-scale purchases of financial assets by central banks. Central banks have doubled down on QE in reaction to the Covid-crisis.

QE has unintended side-effects. By pushing up the prices of the financial assets purchased, it favours already well-to-do asset holders. Given these consequences, central banks found themselves in the spotlight and pressured to justify their policies.

Read More

The case for an independent environmental agency

In recent decades, Western democracies have seen a trend towards the use of independent agencies (IAs) to insulate certain policy issues from direct political influence. Of course, such delegations can be revoked, but they do put the decisions in question at arm’s length from elected representatives for the time being.

Given the emphasis on the accountability of elected representatives in a democracy, how can one justify such instances of delegation? Advocates of IAs claim that they will do a better job at attaining the policy objectives in question. In particular, this will be the case in policy areas where governments face commitments problems that will prevent them from adopting optimal policies.

Read More

Attaching strings now is key to shaping post-Covid-19 future

Let’s make the post-pandemic world socially and environmentally more sustainable – a better place.

This sentiment is common these days among both politicians and academics. At the same time, many crisis management decisions by governments, central banks, and other public institutions make an appeal to the idea that “there is no alternative” (TINA) when it comes to the policies we use in the immediate term to prop up the economic and financial system.

The disconnect between the laudable long-term intentions for change and what are perceived as short-term constraints is not just disconcerting, it is also potentially harmful. It ignores important lessons from recent crises, notably the 2008 financial crisis: short-term crisis management decisions can have significant, sometimes unintended, side-effects that undermine fundamental social policy goals.

Read More

My pension fund, my conscience

In some situations, society permits individual citizens to not fulfil otherwise binding requirements when the latter conflict with the individual’s deeply held ethical convictions. The classic example are pacifists who obtain an exemption from military service. I submit that an argument along these lines also applies to collective pension plans. Such plans need to offer their participants a minimal level of influence over their portfolios to be legitimate.

Read More

Why central banks must change before the next crisis hits

Our recent book Do Central Banks Serve the People? sheds a critical light on the actions of central banks in the wake of the 2007 financial crisis. Using the US Federal Reserve, the European Central Bank, and the Bank of England as examples, we show how they have stretched their mandate beyond their traditional tasks of price stability and financial stability. This short introduction to the book summarizes the argument that the expanded role of central banks has three serious drawbacks.

Read More

Powered by WordPress & Theme by Anders Norén