Ireland has appointed the head of New Zealand’s Treasury department, Gabriel Makhlouf, as the next governor of its central bank. He succeeds Philip Lane, who is moving to Frankfurt to join the executive board of the European Central Bank as its chief economist.
Confirming Makhlouf’s appointment to the Central Bank of Ireland, Irish finance minister Paschal Donohoe said:
“Gabriel has demonstrated his broad and detailed knowledge of economics, financial markets, monetary policy and fiscal policy, and has the experience of leading a large and complex public service organisation of 10,000 people.”
Before heading New Zealand’s treasury, Makhlouf was chair of the OECD committee on fiscal affairs, the world’s leading tax rule-making body.
According to the Financial Times, this is a priority area for Ireland in light of moves to overhaul global corporate tax rules.
In this country, in its report on the appointment, Stuff said Makhlouf is credited with introducing well-being measures into government Budgets.
Makhlouf’s agenda remains full before he leaves New Zealand in a month of so because he is helping prepare the Budget to be delivered by Finance Minister Grant Robertson on May 30.
The well-being index used by the Treasury takes account of 38 different measures including sex, age, ethnicity, and deprivation as well as traditional gross domestic product and cost benefit analyses.
But hey – someone out there must be bothered about Makhlouf’s role in the well-being business.
Yep. Stuff has turned to NZ Initiative chief economist Dr Eric Crampton, who fears “woolly thinking” is being introduced into government departments responsible for deciding on policies and expenditure.
“My worry is that the large number of indicators gives analysts in government departments the freedom to choose the ones they prefer and ignore robust cost benefit analyses,” Crampton said.
As an example of the move away from hard analysis, Crampton referred to a Heartwork Well-being card game that names more than 100 feelings, as a way of promoting empathy among government officials.
Oh, yes. The card game. Point of Order has reported on it and on Crampton’s concerns with it.
But it seems Crampton had more to say about Makhouf’s legacy than Stuff reported.
He says Chris Hutching called him for comment about it and after a wide-ranging chat, Crampton sent through “a potentially quotable-quote” that wasn’t picked up in the final article.
Here’s what he said:
“Secretary Makhlouf is best known for advancing Treasury’s “well-being” approach to economic analysis. There is some merit to that approach: economic analysis always should take a very broad approach in considering costs and benefits. But successful implementation of the approach requires a depth of competence in economic analysis. That depth has eroded substantially during Makhlouf’s tenure. Treasury shed competent senior economists and hired junior analysts who often had little or no training in economics. Makhlouf’s real legacy is not the well-being agenda; it is rather a severely weakened Treasury.”
As for Hutching referencing the Treasury card game,
” … I’d given it more as example of the woolier side of well-being at Treasury, and where things risk heading with the erosion of economic competence there. I’d referred to the plethora of well-being indicators in the well-being framework as potentially providing too many analyst degrees of freedom; I don’t know how many feelings are in the card game.
“We’re what, six weeks or so away from the next Treasury CE needing to be in place? Nobody seems to know anything about the next appointee; I understand it is not normal for this not to be known by now.
“I take it as a good sign though. The most simplest explanation is that the appointment process has been delayed or reconsidered relatively late in the game. And I expect that to be more likely to have happened for good reasons than for bad reasons. Treasury needs a very strong appointment.”
Former RBNZ economist Michael Reddell makes some observations about the Irish appointment on his blog, too.
He says he had been tempted to write a post about the new head of the Irish central bank,
” … perhaps offering some pointers to my (handful of) Irish readers about the propensity of their new British Governor to speak openly, and typically not in a very robust or convincing manner, about all manner of things, all while the foundations of New Zealand’s economic prosperity – our dismal productivity record – were neglected.
“No doubt he will be a solid administrator and is a nice guy, but it seems like quite a step down from Governors such as Philip Lane and Patrick Honohan.”
But Reddell is laudatory that – unlike the New Zealand situation – the appointment of the Irish governor was made by someone (an elected minister) with a democratic mandate.
As for the vacancy in the position of New Zealand Secretary to the Treasury, he hopes that between the Minister and the State Services Commissioner they come up with a better appointment this time round. But as he noted earlier in the year after the advert appeared, “it is hard to be optimistic” and “it isn’t obvious that either the Minister or SSC sees a problem”.
Point of Order 