Hughes, P and White, E (2010), ’The Space Shuttle Challenger disaster: A classic example of Groupthink’, Ethics & Critical Thinking Journal, Vol. 2010, Issue 3, pp. 63. Iaryczower, M, Lewis, G and Shum, M (2013) ‘To elect or to appoint? bias, information, and responsiveness of bureaucrats and politicians’. Journal of Public Economics 97, 230–244. IMF (2013), ‘Key aspects of macroprudential policy’, available at: http://www.imf.org/ external/np/pp/eng/2013/061013b.pdf. Janis, I (1972), ‘Victims of groupthink: A psychological study of foreign policy decisions and fiascos’, Boston: Houghton Mifflin Company. 14  BIS central bankers’ speeches  Janis, I (1982), ‘Groupthink: A psychological study of policy decisions and fiascos’, Boston: Houghton Mifflin Company. Jensen, M and Meckling, W (1976), ‘Theory of the firm: Managerial behavior, agency costs and ownership structure’, Journal of Financial Economics, Volume 3, Issue 4, pp. 305–360. Kahneman, D (2011), ISBN 978–0374275631. ‘Thinking  Fast  and  Slow’,  Farrar,  Straus  &  Giroux,  Kahneman, D and Tversky, A (1979), ‘Prospect Theory: An Analysis of Decisions Under Risk’, Econometrica 47, Chart 10 shows the fan chart for inflation from the Bank’s most recent inflation report, pp 313–327. Kaplan, A (1964), ‘The Conduct of Inquiry: Methodology for Behavioral Science’, Transaction Publishers. King, M (2010), ‘The MPC ten years on’, lecture to the Society of Business Economists. Available at: http://www.bis.org/review/r070507a.pdf. King, M (2013), ‘Monetary policy: many targets, many instruments. Where do we stand?’, Speech given at the IMF Conference on ‘Rethinking Macro Policy II: First steps and early lessons’. Available at: http://www.bankofengland.co.uk/publications/Documents/speeches/ 2013/speech649.pdf.

This responsibility rests with the Prudential Regulation Authority (PRA) at the Bank, specifically its Board. The PRA Board also comprises both Bank insiders and outsiders. 40 So in a nutshell, for the first 300 years of its history the Bank of England operated as an agent of government. In the subsequent 20 years, its degree of policy discretion has been transformed. It now comprises monetary, macro-prudential and micro-prudential policy – a “3M” regime. The Bank’s span of responsibilities may well be unique, at least among advanced economy central banks. Though there are differences in detail, there are also striking elements of institutional similarity in the decision-making architecture for monetary, macro-prudential and microprudential policy, as carried out by the MPC, FPC and PRA respectively. Let me mention four features in particular: (a) Goal dependence: The policy objectives of all three policy committees are set in statute by Parliament, reflecting the attitudes of the electorate at large. In the language of economics, the 3M regime thus exhibits “goal-dependence”. 41 Though different in detail, these objectives share some similarities. For example, the MPC and FPC have a unique primary objective, augmented with a common secondary objective. 42 (b) Instrument independence: The policy instruments of the three policy committees are delegated, through statute, to them. In other words, the settings of these instruments on a day-to-day basis are for the Bank of England’s policy committees, subject to meeting the Parliamentary-set target. The 3M regime thus exhibits “instrument-independence”.