So why didn’t the Bank of Japan print more money? If they didn’t have an incentive one way or another I would expect them to cave to the political pressure, so what was the counter-incentive? Did they genuinely disagree and think that printing money was a bad idea? Were they reluctant to change policies because then they would look stupid?
Also I propose the “I can’t do anything because doing something would be arrogant” attitude be termed modesty-paralysis.
Genuinely held austarity-type ideologies are popular among people who care a lot about central banking (possibly due to the great depression?), and I’m guessing that’s what happened at the BoJ. It seems to be what happened in the US, which made similar mistakes, though less badly.
Actually that link quite interesting. Forward guidance (signalling that you intend to create inflation) can create inflation if people feel it is credible. Unfortunately, committees tend to result in compromise decisions in the face of uncertainty, rather than decisive action and further than that, it is harder for a committee to credibly commit seeing that the members don’t know whether other member will keep their support up over time. So it’s actually really hard for a committee to implement.
Eliezer’s account seems to be the one in his inflation target FAQ. In the above post, though, Eliezer isn’t claiming to know of any strong reason for the Bank of Japan to be behaving this way; he’s saying that the obvious incentives favoring competence aren’t so strong that they allow us to make confident predictions one way or the other. He’s sufficiently uncertain at the outset about how good their decision-making will be that he can take local evidence of poor decision-making more or less at face value, even without knowing the specifics of why they’re behaving in this particular way.
The key decisionmakers at the Bank of Japan might been vulnerable to any number of ideological commitments or epistemic missteps. They might have had respected colleagues or friends whose beliefs or esteem they especially valued, and who happened to skew toward bad views of monetary policy. It’s surprising if someone is willing to forgo large financial incentives in order to look good to a handful of friends at dinner parties, but it’s not so surprising if someone is willing to forgo looking good to one group of people in order to look good to another group.
So why didn’t the Bank of Japan print more money? If they didn’t have an incentive one way or another I would expect them to cave to the political pressure, so what was the counter-incentive? Did they genuinely disagree and think that printing money was a bad idea? Were they reluctant to change policies because then they would look stupid?
Also I propose the “I can’t do anything because doing something would be arrogant” attitude be termed modesty-paralysis.
Genuinely held austarity-type ideologies are popular among people who care a lot about central banking (possibly due to the great depression?), and I’m guessing that’s what happened at the BoJ. It seems to be what happened in the US, which made similar mistakes, though less badly.
Scott Sumner suggests here that central banks worry about small risks that they’ll need to be bailed out if their balance sheets get too large. (http://econlog.econlib.org/archives/2017/04/what_were_the_c.html)
Actually that link quite interesting. Forward guidance (signalling that you intend to create inflation) can create inflation if people feel it is credible. Unfortunately, committees tend to result in compromise decisions in the face of uncertainty, rather than decisive action and further than that, it is harder for a committee to credibly commit seeing that the members don’t know whether other member will keep their support up over time. So it’s actually really hard for a committee to implement.
Eliezer’s account seems to be the one in his inflation target FAQ. In the above post, though, Eliezer isn’t claiming to know of any strong reason for the Bank of Japan to be behaving this way; he’s saying that the obvious incentives favoring competence aren’t so strong that they allow us to make confident predictions one way or the other. He’s sufficiently uncertain at the outset about how good their decision-making will be that he can take local evidence of poor decision-making more or less at face value, even without knowing the specifics of why they’re behaving in this particular way.
The key decisionmakers at the Bank of Japan might been vulnerable to any number of ideological commitments or epistemic missteps. They might have had respected colleagues or friends whose beliefs or esteem they especially valued, and who happened to skew toward bad views of monetary policy. It’s surprising if someone is willing to forgo large financial incentives in order to look good to a handful of friends at dinner parties, but it’s not so surprising if someone is willing to forgo looking good to one group of people in order to look good to another group.