Bankers, Bureaucrats, and Central Bank Politics: The Myth of Neutrality.

Quiliconi, Cintia

Bankers, Bureaucrats, and Central Bank Politics: The Myth of Neutrality. By Christopher Adolph. Cambridge: Cambridge University Press, 2013.

This book offers new ideas to the conventional thinking about central banks and monetary policy by challenging the view that central banks tend to choose optimal policies if given enough freedom to do so. The book's main focus is on bureaucratic agents and their policy preferences. The main argument is that "shadow principals in the financial sector and partisan governments shape the beliefs and career incentives of bureaucratic agents otherwise legally insulated from outside pressure" (p. 1). The book claims that central bankers perpetuate the myth of neutrality because it serves to cover the distributional costs of monetary policy (p. 10).

Christopher Adolph makes the obvious but vital argument that central bankers are not neutral bureaucrats because, for many of them, central banking is a step toward a career in the financial sector. Thus, they are driven by their narrow professional perspectives and ambitions since they are concerned with pleasing future employers, and they bend policies to win the approval of shadow principals--particularly big banks--instead of having the public interest as their main objective.

The book contributes to the debates about how agents and institutions shape outcomes, and it is framed theoretically by debates on interests and institutions in comparative political economy. The arguments are methodologically well operationalized through the creation of a theory of career effects to measure central bankers' motivations for career socialization and incentives in Chapter 2. This chapter analyzes whether central bankers who are bureaucrats are more or less combative on inflation than central bankers who have a career history in the financial sector, thus showing that monetary policy is made according to central bankers' career paths (p. 54).

Chapter 3 examines the impact of career backgrounds on the level of inflation by exploring data for industrialized countries. It also considers the effect of the "revolving door" between the central bank and financial sector (p. 33). The chapter finds important links between pre- and post-central bank careers, which influence central bankers' policy preferences, suggesting that career ambitions play a significant role in affecting inflation (p. 103).

In general terms, this is a thought-provoking book on how interests and socialization influence monetary policy. The book will be particularly useful for those studying monetary policymaking, delegation, and bureaucracy as well as for scholars interested in comparative political economy.

Reviewed by Cintia Quiliconi