This is usually the result of doctors weighing their own preferences (the risk of reputational or financial loss) over the patient’s (the risk of health problems worsening). Myopia biases Psychological experiments show that people differ materially in their capacity to defer gratification. The classic example is the “Marshmallow test” devised by Walter Mischel in the 1960s. 15 Mischel gave children at Stanford University’s Bing Nursery School the choice between one marshmallow for immediate consumption or two if the child waited. Not only did children differ significantly in their ability to defer gratification. As researchers followed the fortunes of these children as they grew older, a remarkable pattern emerged: children which had exhibited greater patience in their pre-school marshmallow test subsequently outperformed their impatient counterparts in everything from school examinations, to salaries, to reported levels of life satisfaction. Subsequent sociological studies have established a longer list of ways in which impatient or myopic behaviour influences human decision-making. Myopic individuals are more likely to smoke, to suffer alcohol and drug addiction problems, to be obese and to have credit card debt problems. 16 Myopia also differs significantly across countries. 17 To explain this, Richard Thaler developed a psychological model based on the “two selves”. In effect, each of us comprises a patient “planner” and an impatient “doer”. 18 Neuro-scientific evidence has subsequently lent support to Thaler’s model, with different areas of the brain found to be responsible for patient and impatient behaviours. 19 In practice, myopic behaviour appears often to hold sway in everyday decision-making.

37 In the setting of monetary policy, the Bank’s role from the end of the second world war through to the 1990s was as implementer, not decision-maker. The Bank had little, if any, independence in the setting of monetary targets or instruments. That changed progressively in the 1990s and decisively after 1997. Through the Bank of England Act 1998, the Bank was granted operational independence for the setting of monetary policy in the UK, to meet an inflation target set by government. Specifically, monetary policy came to be set by a nine-person Monetary Policy Committee (MPC), meeting monthly and comprising five Bank “internals” and four “externals”. 38 In the light of the crisis, the UK’s policy framework has been further changed. The Financial Services Act 2012 vested the Bank with further responsibilities, creating a new 10 person Financial Policy Committee (FPC), meeting quarterly to execute macro-prudential policy. The  31  Asch (1951). 32  Janis (1972, 1982). 33  Hughes and White (2010). 34  Kaplan (1964). 35  Tuckett (2011). 36  Janis (1982). 37  Capie, Goodhart and Schnadt (1994). 38  King (2010), Lambert (2005). BIS central bankers’ speeches  5  FPC sets regulatory policy to ensure the stability of the financial system as a whole. Like the MPC, it comprises both internals and externals. 39 The Financial Services Act also gave the Bank responsibility for micro-prudential supervision – ensuring the safety and soundness of individual financial firms.