The power of central bankers - about which Edward Luttwak wrote in the LRB of 14 November - arises not just from their control over important aspects of economic policy, but also from the acceptance by the rest of us of what they may legitimately do in the exercise of this control. Until recently, our acceptance of the notion that central bankers should be committed to price stability has been entirely uncritical; and price stability (not low, but zero inflation) is what the European Central Bank will be required to maintain. But now that European Monetary Union suddenly looks a real, even an imminent possibility, a skirmish has broken out among economists about whether price stability is what monetary policy should be required to achieve.

LRB 12 December 1996 | PDF Download