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Cost-benefit analysis is far from being a perfect tool. In particular, the subjective nature of costs and benefits makes all calculations arbitrary. Thus, it may happen that policymakers take bad decisions even when applying the best methodology. Yet, the world of politics requires that decisions be taken, and I believe that cost benefits analysis can still be helpful (and better than groping).

In November, Germany’s Finance Minister Olaf Scholz wrote an article in the Financial Times claiming that he had devised a common European Deposit Insurance Scheme (EDIS)[[EDIS has since 2015 been envisaged as a Eurozone-wide scheme which would cover the costs of repaying deposits of up to euro 100,000 lost in future bank failures.]] that could be acceptable to both sides of the hitherto gridlocked debate. Mr Scholz also circulated a document which he believed provided a clever solution to the stand-off between the heavily indebted European member states (‘debtor countries’) and the rest of the Eurozone. In particular, since the 2010 outbreak of the first Greek sovereign-debt default crisis, a number of countries led by Germany resisted debt mutualisation and the sharing of the costs of other countries’ bank failures. In fact, the financially stronger countries demanded new banking rules, which would ensure that any common bank insurance scheme would apply only to banks demonstrably solvent at the scheme’s inception. The stand-off has endured for over two years because the weaker countries, and Italy in particular, continue strongly to resist any reform of the rules which would overtly expose any of their major banks as insolvent.

Over the years, we have witnessed a general decline in the level of trust in the news as recorded by the general public. For example, according to the latest Reuters Institute Digital News Report, the average level of trust in the news is down 2 percentage points to 42%, with peaks such as -11 in France or -6 in The Netherlands. The literature suggests several factors which could explain such decline. Citizens perceive a drop in the quality of journalism, resent the rise in commercialization, react to the abundance of information after the internet revolution. Populism with its fake-news mantra has also played a role. Moreover, any event or situation that raises doubts about impartiality can affect trust.

In a recent speech, the Vice Chair for Supervision at the Federal Reserve R.K. Quarles extensively cited F.A. von Hayek. Quarles highlighted Hayek’s argument on freely determined prices as crucial to convey knowledge across operators and enhance a functional economic order. By contrast, he argued, distorted prices harm economic performance. Rather surprisingly, however, Quarles concluded by endorsing another cut of the Fed Funds rates (this line of thinking also applies – mutatis mutandis – to the European context too). Indeed, interest rates are “prices”, and manipulated interest rates are also “biased prices”. So, what should we make of Quarles’ speech?

In the 2000s, a short book by philosopher Harry Frankfurt made the term ‘bullshit’ socially acceptable. In 2018, anthropologist David Graeber published his bestseller, in which he argued that roughly half of the employment relations in the Western economies are ‘bullshit jobs’: they provide no benefits to society and their purpose remains unclear even to those employed. Graeber’s hypothesis received much praise. After all, it addresses widely spread stereotypes about the alleged uselessness of well-payed jobs in the service sector, for example in marketing, management or consulting.

French President Emmanuel Macron’s spearheaded opposition to block European Union accession talks with Albania and North Macedonia during the European Council’s recent meeting in October. By doing so, he is not only dangerously and severely undermining the credibility of the EU accession process. He is also indicating to the non-EU countries in the Western Balkans and elsewhere that their future lies solely in their hands, as that they cannot rely on the European Union to support them in their efforts to strengthen institutions, reform public policies and further liberalize economies.

As the momentum has built behind calls for policy responses towards climate change, the ECB and the Bank of England have not been the quickest central banks to act. Back in 2011, the Banco do Brasil announced that banks must incorporate ‘Environmental and Social Risk’ in their reporting and risk management strategies. In 2012, the Reserve Bank of India invoked its 1949 Priority Sector Lending legislation to encourage Indian banks to allocate credit to green projects: renewable energy infrastructures such as biomass fuel production, wind farms and solar. Last but not least, the governor of the French central bank recently suggested that the world authorities (i.e. taxpayers) should devote no less than $ 900 bn per year to address the climate problem and that the Bank will be ready to support the policymakers’ actions in this area. As a matter of fact, one of the earliest central banks to actively intervene on climate change was the People’s Bank of China. In 2007, working with other institutions like the Ministry of Environmental Protection and the China Development Bank, it acted to restrict financing from companies that failed to comply with environmental rules such as emissions targets. This might seem at odds with China’s huge programme of coal fired power station construction which is producing one new one each week.

Many people share the opinion that Mafia is a typical Italian phenomenon, something about which only Italians should worry. This opinion is wrong. Data recently released by Europol show that thousands of criminal organizations active in Europe can be labelled as of mafia-type, with about 70% of them operating in more than one country.

In many European regions there is indeed evidence of a medium-to-high share of organized crime investments over the total.

The structure of a country’s tax code is an important determinant of its economic performance. The Tax Foundation’s International Tax Competitiveness Index has ranked OECD countries’ tax systems for the last six years, and every year Estonia has been the number one country on the Index while France has remained at the bottom of the rankings.

New entrants into every aspect of banking were encouraged by two recent regulatory developments: the Open Banking initiative and the ‘sandboxing’ exemptions from regulations. Open Banking, part of the Payment Services Directive enacted October 2015, encourages customers to allow their data to be shared with licensed FinTech startups. We provided some detail previously. Sandboxing is relatively new, and identifies the remarkable regulatory practice of waiving the rules to help companies creating new financial technologies (FinTechs) get a foothold. In particular, the concept of a sandbox is that the development of new useful innovative tech will be held back if the full range of regulations need to be complied with immediately. In banking, one obvious costly impediment to startups is the required minimum level of regulatory capital. Of course, there are reasons why these minima exist, so the decision to license a startup to ‘play about in the sandbox’ rather than comply is based on matters such as the number of customers exposed to the new tech, and perceived risks to the financial system. Obviously, at the inception of any new challenger bank these risks are small. But at what point is a tech startup adjudged to be mature enough that it should leave the sandbox and play with the grown-ups? And when instructed so to do by regulators, how will these new challengers cope?