In today’s FT, Sir Nicholas Stern, who is currently Professor of Economics & Government at the London School of Economics and has served as Chief Economist at the EBRD and World Bank, argues for an independent authority to evaluate economic risk on behalf of the world.
Good idea. But his idea of independence is a bit limited – too independent, in fact. He rightly argues that it should, unlike the International Monetary Fund, the World Bank, the Financial Stability Forum or the Bank for International Settlements, be beyond the influence of big countries and should have no lending or policy responsibilities that would bias its perspective.
Yet his idea of independence seems to revert to a now-antiquated notion that ‘the economy’ should be treated as just this system that rolls on, with no need for anything much more than the occasional warning and adjustment to keep it on the rails.
For the lead author of the UK Government’s 2006 Review of the Economics of Climate Change, this is a little odd. Any such body certainly should have policy goals. Stopping the planet boiling might be a good one, and one that Sir Nicholas is more aware of than most. He is also singularly well equipped to say what that means, at least among conventional economists.
But focusing on climate chaos – and ecological collapse and resource depletion and the population explosion – are all themselves only sensible economic goals because they represent (in a still very abstract way) what society needs out of the economy.
So one final question: if this risk assessment body should be independent of governments, does it then have to be ‘independent’ of the people whose interests these governments that are so singularly failing to represent? That is the real risk: that all the institutions – political as well as economic – are tainted with the same economistic obsessions, and will not see the wood until all the trees have been burned down.
Source: ‘The world needs an unbiased risk assessor’, Nicholas Stern, Financial Times, March 24 2009.