Christopher Adolph- Bankers, Bureaucrats and Central Bank Politics: The Myth of Neutrality (2013)

Chapter 1, titled Agents, institutions and the political economy of performance, opens the book by investigating the inside and outside factors which influence central bankers' decision making.

Adolph identifies how the granting of central bank independence is a principle-agent model of delegation. He describes two reasons why this model may be problematic:

1.     Moral hazard- agents (central bank) may secretly benefit at the expense of the principle (government)
2.     Adverse selection- the principle (government) may unintentionally pick an agent (central bank) which has slightly different policy preferences.

He goes on to emphasise the importance of understanding exactly what agents desire, paying attention to the impact that a turnover of personnel within an institution will have- “new agents transform institutions and policies from the inside out” (p. 9).

The book aims to solve the issue which is that the role of central bankers is often overlooked, as they are still assumed to be impartial bureaucrats. Monetary policy is often approached by economists as a purely technical problem, promoting a “myth of neutrality”.

“The myth of neutrality persists because central bankers have every reason to feed it- it is always easier to be considered above politics, whether or not one has a political agenda” Kettle, 1986

Adolph outlines eight material and non-material bureaucratic motives, fitting them to the case of central bankers:

•    Rents bribes and perks to maximise budgets. Perhaps not so common to central bankers where they work in a money-creating agency which already has a very high budget.
•    Career concerns- Very true to central bankers. On average, a central banker will only work in this role for five years, so will be looking for ways to increase their future opportunities for employment. 
•    Political power- This does motivate central bankers, but not one individual more than another.
•    Intrinsic motivation- Inspired by Max Weber, this includes motivations such as job satisfaction. Adolph believes this does occur with central bankers, but isn’t the most significant influencing factor. He describes how from the 1970s onwards, economists moved away from this Weberian thought to consider how bureaucrats may instead be self-interested, theorising the ‘homo economicus bureaucrat’.  
•      Technocratic rewards- Adolph believes that central banker’s satisfaction in ‘getting things right’ can easily be overridden by other motivations.
•    Policy preference- Their resistance to government agenda seems to depend on how easy their exit options are. If the banker has few prospects outside of their current role in central bank, they are unlikely to resist enacting government policy which goes against their own interests.
•    Socialization- when an organisation passes on its shared norms to its members. This is particularly the case with central bankers because they most likely will have worked at other organisations before taking on their role. Their ideas and expertise from their previous places of work are said to have a big influence on the decisions they make.

The problem, which Adolph outlines himself, is that it is difficult to prove these motivations. However, I think his theory is interesting as it makes the reader rethink the assumption that central bankers are impartial.