1.1 Objectives

Although much has been made of the economic theory which is said to show that central bank independence improves economic performance, and perhaps even more of the evidence which is said to support that view, there has been little serious or worthwhile attention to the issue of its relation to democratic values. In particular, it seems that the advocates of independence have failed to appreciate that there are a variety of different ways in which these values might feature in a full assessment of the proposal. As a result, or so this chapter argues, they have prematurely dismissed the claims of democratic control of monetary policy. It is true that some argument for independence which acknowledges these claims might be made, but my objective is to demonstrate that this has not as yet been done. If the correct conclusion is that central bank independence is desirable, more argument is therefore required to reach it.

Whilst it is clear that the advocates of independence have not given much attention to the issue of the democratic legitimacy of their proposals, it is less clear why this is. I suggest the impression that ignoring the issue is a safe strategy has been nurtured by two characteristics of the literature. The first is that various illusions combine in many arguments for independence. Some simply concern the proper role of democracy, which is often, apparently, presumed to be much more limited than political philosophers have tended to suppose. Others concern economic evidence, where studies are alleged to support hypotheses they do not, and in one or two cases, even ones they contradict. And yet others concern the significance of particular pieces of economic theory, where it is often supposed that arguments demonstrate rather more than they do. By a combination of these things it has come about,