March 5, 2013
by Annelise Riles

The Changing Politics of Central Banking

Bank of Japan, Tokyo

Last weekend we convened a quite exciting conference on “The Changing Politics of Central Banks” sponsored by the Cornell International Law Journal (symposium website). The focus on central banks as political actors is clearly timely given the growing awareness of the public of the distributive effects of monetary policy and also the debates taking place in many countries around the world about the proper scope of independence for central banks.  Yet we lack a sufficiently rich vocabulary for talking about this politics. Moreover, this is one of those interesting places where traditional right-left divides do not apply: what do we make of Paul Krugman’s embrace of Abenomics, for example?

The perspectives of the conference participants–academics and central bankers, mainly–varied considerably.  Keynote speaker Dan Tarullo pointed out that while independence make sense in the realm of monetary policy there is no reason for independence with respect to the central bank’s regulatory role, since in that space it acts very much like other kinds of administrative agencies which are subject to various forms of oversight (press coverage of Dan Tarullo’s remark: 1, 2, 3, 4).  Peter Lindseth, an administrative law and EU law specialist, spoke of the need for precisely this form of administrative oversight. Anna Gelpern pointed out that given what she called “the big blur” of monetary and fiscal policy, we need to begin to reeducate the public about what political legitimacy for central banks should look like.  Katharina Pistor argued that the focus on central bank legitimacy was not the entirely right question–that we should be asking “what kind of global financial system do we want”–because as long as we have this system, central banks can do nothing other than what they are currently doing.  Bob Hockett argued for an international central bank that would better address the needs of the global financial system than can a network of national central banks.  I took the opposite approach to Bob to the same problem: I suggested that the field of conflict of laws, with its rules for determining “who is in charge” in any particular situation, could better coordinate regulation transnationally than can global institutions.  Doug Holmes presented the findings of his extensive research on how central banks communicate with their various publics and constituencies in order to demonstrate that central banks are in fact more in touch, and more accountable, than the formal institutional structure would suggest.

What was resolved at the conference? I think we clarified a few points:

  1. Central banks are indeed political institutions that can and should be analyzed as such.
  2. Given that the genie is out of the bottle and there is indeed a “big blur” between monetary and fiscal policy, we need new ways of talking about the political accountability of central banks.
  3. There are nevertheless interesting variations in this politics from one state and market to the next, and even in any one context, the processes of accountability are far more complex and multivocal than they appear at first site.
  4. All of this impacts on the ability of central banks to cooperate in order to forestall future financial crises.


Sounds like a mandate for more research.  Stay tuned!

March 7, 2012
by Annelise Riles

Launching Meridian 180

One of my early memories of my childhood in 1970s France, with summer vacations in the Midwestern United States, crystallizes why I am an anthropologist, and what I see is the hope of comparative and international law. The memory  is in two scenes. In the 1st scene,  my 4th grade social studies teacher is teaching us about America. America is a country so polluted she tells us that on every street corner are meters that look like parking meters. When a certain alarm goes off, everyone grabs their oxygen mask from their handbags put the quarter in the parking meter like machine, obtains a dose of oxygen and wears the mask until the sirens tell them that it is safe to remove them. The other students are fascinated, and I go into internal tangles. Should I try to protest that this is utterly false? Should I try to point out that the image of selfish hedonists the teacher is painting does not correspond to anyone I personally know? no, everyone is enjoying the story too much to care.   In the 2nd scene a few months later, I join a bunch of American kids on the playground as they throw rocks across the puddle, declaring that  we are quote bombing France unquote. What follows is a chain of stereotypes of French people explaining why they deserve to be “bombed”, all negative of course, and presumably all drawn from popular media sources since none of these kids have ever been to Europe. My own recollection of all these episodes is not so much outrage as utter confusion: how can people I like and respect have so little awareness of how little awareness they have? As I grew older, of course I had plenty of opportunity to learn how that same question applied in so many ways to myself and my own myopias.  The blinders become fancier, more professional, more technologically sophisticated, more entrenched in complex institutional and cultural relationships, but just as hard to notice, let alone remove, as on that fourth grade playground.

A year ago this week, Japan was hit by them massive tsunami and earthquake, and also suffered one of the worst nuclear crises in history. In the terrible days after that incident, as each of us reflected on what we could contribute, some of us began to think that perhaps we  also needed to confront our own personal and professional and cultural myopias,  and  to find new ways to build relationships that would help us think in new and hopefully more transformative ways about the policies and choices of our societies. We wondered if understanding better how, for example, our own policies look for the point of view of another society, might help us to avoid disasters in the future, and also how we might find ways to work closely on problems that are transnational in character.

The question  of course preceded Fukushima: many of us had a longstanding sense that the intellectual conversation across the Asia-Pacific Rim region about law and regulation broadly conceived is far thinner and less substantive than it could be, and needs to be to satisfy the needs of the current moment. In thinking about the causes, it seems that some obvious ones are persisting language difficulties and difficulties reading and writing in particular, the problems and costs associated with getting very busy people to be able to spend substantial amounts of quality time together so that they can reach a deeper understanding of one another’s positions, and some degree of lack of comfort or trust.  And perhaps among some colleagues a lack of a sense that the conversation is worth investing the large amounts of time that it requires in current formats.

At the same time, many of us feel that the existing venues and formats for serious intellectual discussion are not satisfactory.  How do we encourage a far more substantive dialogue between different forms of disciplinary expertise and between thinkers in different societies?

Beginning in March, 2011, we began to pull together a special group of visionary thinkers–scholars, policy-makers and professionals–and to address some of these communication difficulties by creating a closed, online platform where people can write in their own languages and have their text translated within a short period of time by postdoctoral fellows.  Two Postdoctoral Fellows (one Japanese speaking and one Chinese speaking) are available to take any projects, research questions, or interventions that might surface out of these conversations forward. We called  this emerging conversation and community Meridian 180, after the anti-Meridian, or international date line, that divides the Pacific.  The goal of this project is to invest in the cultural and intellectual infrastructure for the next generation of trans-Pacific relations.  Through a long-term multi-lingual conversation, the project seeks to make connections and facilitate the development of relations of trust among individuals who together have the capacity to generate the new ideas and to lead the publics in their respective societies to face the significant challenges of the current moment.

Meridian 180 is a project of the Clarke Program in East Asian Law and Culture at the Cornell Law School.  It is a non-profit, non-political project funded through private donations and with support from Cornell Law School.  It is comprised of Senior Fellows and of Members in law, the academy, private practice and policy circles who meet regularly via an on-line platform supporting multilingual conversation, as well as periodically in face to face conferences.  Ideas that emerge from these conversations are then incubated and developed, with the help of Postdoctoral Fellows based in Ithaca, NY, into forms in which they can make a difference in each individual society–ranging from policy papers to academic books, blog entries, and individual conversations with policy makers.

Our current forum, “How can we bring closure to crises,” marks the anniversary of the earthquake and tsunami in Japan by reexamining this particular disaster and reconstruction project from various perspectives and by putting the issues in the context of other similar disasters around the world.

After a year of work, we are thrilled that Meridian 180 is now finally official! We still have many challenges, from finding long-term sources of funding to finding a way to convince busy elites to make room in their minds and their schedules to broaden their own cultural and disciplinary horizons.  But what is really encouraging is the progress we are making on complex legal and policy questions like “what is the scope of privacy rights in the digital age?” or “what is the role of the central bank in today’s markets?”  What is even more encouraging is the commitment many of our members have to the project and the sense they have that it serves a purpose in their lives.  For more information please see here.

October 26, 2010
by Annelise Riles
1 Comment

How is Health Care like Financial Derivatives?

Health Care and MoneyMost people think about the debate about health care reform and the debate about financial regulation reform as quite separate problems. But are they really? Every first-year derivatives textbook tells the student that derivatives are a form of insurance—a way of hedging against risks that are substantial and yet hard to quantify. From a societal point of view, the risk of illness, and the costs of care in old age are one of the largest such risks to the society and economy as a whole, and so health insurance serves a similar economic function as derivatives in providing a mechanism for society to spread large economic risks. For the average working family, both are part of the package of financial decisions that must be made, and trade-offs have to be made between, for example, purchasing a more expensive health plan with higher premiums but better coverage for high ticket health needs versus putting that money in a 401(k). These are different ways of providing for the uncertainties of the future. But they pose similar challenges to ordinary consumers/investors of evaluating complex products provided by retailers who have more knowledge than consumers about what the statistical odds of a payout in the consumer’s favor might be. Obviously costs in one area impact the other: if consumers find themselves facing catastrophic health care expenditures the first thing they will do is withdraw money from their 401(k) to cover those expenses, and they certainly will not have extra money to invest in financial products. So stability and predictability in the area of consumer health care costs also contributes to consumers’ ability to invest in financial products.

One difference of course is that health insurance is a financial product sold to ordinary retail investors. Derivatives in contrast are for the most part available only to what the law refers to as “sophisticated investors”. The good sense behind the insurance exchanges idea in the health care legislation is that the experience from finance clearly teaches us that retail investors are not in a position to sit across the bargaining table from large institutional market players with substantially greater information about the possible risks and rewards of certain financial transactions. Just as securities sold on an exchange are standardized and hence far easier for ordinary consumers to evaluate from the point of view of publicly accessible information, the same should be true of the investments all but the most sophisticated investors make in health insurance.

Some other lessons from the financial debacle may have implications for the health care issue. One lesson of the financial crisis concerned the sometimes unhealthy role played by investment banks, whose staff was motivated by inappropriate incentives, in the valuation of ordinary companies. We see similar problems in the way insurance companies’ mandates are often creating inappropriate pressures on health care providers.

Recently a conversation has begun between specialists in insurance regulation and specialists in financial regulation around these questions. A conference will be held at the Cornell Law School in April 2011 bringing together behavioral economists and institutional sociologists and anthropologists and also regulators and policy makers working in both fields. The conversation between behavioral economists and sociologists and anthropologists of markets has already yielded important insights about 1) the networks through which prices come to be set in the financial markets, 2) innovations in regulatory form and process that can lead to better compliance and more optimal behavior by market participants, 3) what paradigms might replace the neoclassical model and associated rational actor model of human behavior that has undergirded so much market law and policy over the last two decades. At the next conference, we plan to ask how the insights from this conversation might speak to current problems in health care policy design. Our starting premise is that markets are not rational in the sense assumed by neoclassical economics, but that through clever institutional design and the exploitation of cultural practices and social networks we can make significant progress toward market stability.

But the big picture is this: we have been talking about health care as a kind of welfare/wealth redistribution issue and for many, such issues should take a back seat to the problems relating to getting the economy back on track and especially bringing stability and predictability to the financial system. But maybe we should instead think of health insurance as an integral element of the financial stability package?

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