Hilarious Jokes and Card Tricks: RBI Deputy Governor on the lighter side of policymaking

New Delhi:

Reading monetary policy statements is a sombre affair for many. Drafting the policy can be even more tedious. But monetary policy decision-making inherently strips away the humorous side of life, Reserve Bank of India deputy governor Michael Debabrata Patra said in a banking enclave in Mumbai.

Underlining the importance of humor in monetary policy, Michael Patra said policymakers need to have a sense of humor to stay sane as they try to deal with the stress of a “perceived threat” to the economy.

“An ‘inflation madman’ who is strongly averse to inflation could go mad if he or she expected higher inflation but had no sense of humour,” said Michael Patra at the 9th SBI Banking and Economics Conclave in Mumbai yesterday.

Years ago, American economist and DailyExpertNews columnist Paul Krugman wrote that the 2006 Fed transcripts show much laughter and an “incredible degree of complacency.”

In his speech “The Lighter Side of Making Monetary Policy,” the vice governor argued that humor in monetary policy-making reflects serious concerns about the economy, rather than a lack of concern or a sense of complacency as suggested by Paul Krugman.

He stated that humor is an integral part of monetary policy making and said that allowing humor into the conversation would help understand monetary policy, its objectives and the decision-making processes behind it a little better.

On economic forecasts, Michael Patra joked that monetary policy makers are made to make weather forecasters look good. “Monetary policymakers are even said to have a sense of humor – that’s why they put a decimal point on their forecasts,” he added.

In a humorous speech, the RBI’s deputy governor said central bankers have an appearance of “drab dullness that, they say, exudes a sense of monetary stability.”

“What if the central bank leader told hilarious jokes and did card tricks?” he posed the question to the public as he followed up and said there is an article with this title in the American Journal of Economics and Sociology.

He dug into the history of monetary policy-making a bit and said that monetary policy used to be a dark art, practiced by magicians and shrouded in secrecy.

“During the gold standard, central bankers were considered high priests of the temple of money. In the inner sanctum sanctorum, they were believed to perform alchemy that allowed base metals such as lead to be converted into precious metals such as gold.”

Michael Patra also recalled what Mervyn King, Governor of the Bank of England from 2003-2013, wrote some time ago. When Mervyn King joined the Bank of England in 1991, he once consulted Paul Volcker, regarded as the champion of central bankers. Paul Volcker answered in one word: “Mystical”.

“That one word encapsulated much of the tradition and wisdom of central banking at the time,” said Michael Patra.

He stressed that much of what goes into the monetary policy decision stems from the deliberations that policymakers have with each other, with the public, and from feedback.

“Monetary policy has been called an art, a science and a craft. But at its core, it is all about informed human judgment limited by great uncertainty, which cannot be replaced by mechanistic models or rules,” he said.