“Good” Justifications NORGES BANK RESEARCH

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“Good” Justifications NORGES BANK RESEARCH A Service of Leibniz-Informationszentrum econstor Wirtschaft Leibniz Information Centre Make Your Publications Visible. zbw for Economics Qvigstad, Jan F.; Schei, Tore Working Paper Criteria for "good" justifications Working Paper, No. 6/2018 Provided in Cooperation with: Norges Bank, Oslo Suggested Citation: Qvigstad, Jan F.; Schei, Tore (2018) : Criteria for "good" justifications, Working Paper, No. 6/2018, ISBN 978-82-8379-027-6, Norges Bank, Oslo, http://hdl.handle.net/11250/2500932 This Version is available at: http://hdl.handle.net/10419/210141 Standard-Nutzungsbedingungen: Terms of use: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Documents in EconStor may be saved and copied for your Zwecken und zum Privatgebrauch gespeichert und kopiert werden. personal and scholarly purposes. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle You are not to copy documents for public or commercial Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich purposes, to exhibit the documents publicly, to make them machen, vertreiben oder anderweitig nutzen. publicly available on the internet, or to distribute or otherwise use the documents in public. Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, If the documents have been made available under an Open gelten abweichend von diesen Nutzungsbedingungen die in der dort Content Licence (especially Creative Commons Licences), you genannten Lizenz gewährten Nutzungsrechte. may exercise further usage rights as specified in the indicated licence. https://creativecommons.org/licenses/by-nc-nd/4.0/deed.no www.econstor.eu WORKING PAPER Criteria for “good” justifications NORGES BANK RESEARCH 6 | 2018 JAN F. QVIGSTAD AND TORE SCHEI Working papers fra Norges Bank, fra 1992/1 til 2009/2 kan bestilles over e-post: NORGES BANK [email protected] WORKING PAPER XX | 2014 Fra 1999 og senere er publikasjonene tilgjengelige på www.norges-bank.no RAPPORTNAVN Working papers inneholder forskningsarbeider og utredninger som vanligvis ikke har fått sin endelige form. Hensikten er blant annet at forfatteren kan motta kommentarer fra kolleger og andre interesserte. Synspunkter og konklusjoner i arbeidene står for forfatternes regning. Working papers from Norges Bank, from 1992/1 to 2009/2 can be ordered by e-mail: [email protected] Working papers from 1999 onwards are available on www.norges-bank.no Norges Bank’s working papers present research projects and reports (not usually in their final form) and are intended inter alia to enable the author to benefit from the comments of colleagues and other interested parties. Views and conclusions expressed in working papers are the responsibility of the authors alone. ISSN 1502-819-0 (online) ISBN 978-82-8379-027-6 (online) 2 1 Criteria for “good” justifications Jan F. QvigstadΨ Tore Schei¥ Abstract Many institutions in a democratic society wield important power by virtue of the decisions they make. These decisions may concern individuals or have a more general impact on society. It goes without saying today that this exercise of power must be accounted for. A supreme court’s reasoning is given in its judgements. A central bank’s reasoning is given in the decision-making body’s minutes. In this paper, we develop criteria for what constitute good written justifications for a decision, not what makes a good decision per se. We look at the two institutions we know best: supreme courts and central banks. Of course, these are not the only institutions that exercise power on behalf of the state, and we also ask whether our criteria could be applied more generally. We assess a selection of supreme court judgements and monetary policy decisions in various countries qualitatively against our criteria, and find that practice largely conforms to the criteria. There are some common features between supreme courts and central banks. In recent years there has been a development in the way the judgments are written in the UK Supreme Court. Earlier, each judge wrote his votum. Now they are writing a common text. With individual writing, there were many different formulations of the normative text. It is easier for the public to relate to one legislative text. The UK Supreme Court, under the presidency of Lord Neuberger, has therefore gradually moved towards writing a joint text. John Roberts, the US Chief Justice, thought that judges should be worried when they are writing separately about the effect on the court as an institution. What about the minutes of the central banks? Professor Alan Blinder at Princeton argues that a central bank that speaks with a cacophony of voices has no voice at all. Professor Otmar Issing, the former Chief Economist and Member of the Board of the ECB, believes that there is a danger that individual minutes provide an incentive for individual members to put themselves ahead of the institution We also test empirically whether the institutions’ decisions and the justifications for these decisions are communicated in clear language. Our analysis is inspired by Bank of England chief economist Andrew Haldane’s speech “A little more conversation, a little less action”, and by the report “Bankspeak: The Language of World Bank Reports 1946-2012” by Franco Moretti and Dominique Pestre at Stanford Literary Lab. We analyse more than 6,000 central bank and supreme court decisions from the past decade and find considerable differences in length and readability across countries and institutions. The grand chamber decisions of the European Court of Human Rights are by far the longest, while the European Court of Justice 1 This Working Paper should not be reported as representing the views of Norges Bank. The views expressed are those of the authors and do not necessarily reflect those of Norges Bank. When it comes to central banks, we benefited greatly from general discussions with Charles Bean and Martin Weale, and had input from Anders Vredin, Harald Bøhn, Øyvind Eitrheim, Marianne Sturød and Helge Brunborg. From the Norwegian Supreme Court we have received useful comments from Arnfinn Bårdsen, Steinar Tjomsland and Georg Fr. Rieber-Mohn. Jens Peter Christensen, Stefan Lindskog and Mats Melin provided important information on the work and judgements of the Danish Supreme Court and Sweden’s Supreme Court and supreme administrative court, respectively. Conversations with Leif Anders Thorsrud gave us the idea of using “big data” and text analysis. Vegard Høghaug Larsen played a key role in the empirical work on readability. Helle Snellingen was responsible for the English translation. Ψ Jan Fredrik Qvigstad is a special adviser at Norges Bank. He has worked at the bank since 1984 and was its deputy governor from 2008 to 2014. E-mail: [email protected]. ¥ Tore Schei is affiliated to Norges Bank as a researcher. He was a justice of the Supreme Court of Norway 1986-2016 and its chief justice 2002-2016. E-mail: [email protected]. 3 employs the most complex language. The Danish central bank keeps things briefest and uses the clearest language, but also has the simplest regime to explain. The Swedish central bank’s minutes stand out as both long and complex, while the Norwegian central bank is unusually concise. Moretti and Pestre analysed the text of all World Bank reports and found quantitative indications that the language of the reports had moved in the wrong direction in terms of readability. We perform the same tests on central banks and supreme courts and find that these institutions’ language has not moved in the same negative direction. Former Bank of England governor Mervyn King argued that the design of an institution “must reflect history and experience”, and there is no doubt that each institution’s way of writing is influenced by its own history. This is what economists refer to as “path dependence”. We wonder, however, whether there is rather too much path dependence in many cases, and whether the institutions in question might benefit from looking at trends and learning from other institutions both at home and abroad. In our work on this paper, we have been particularly wary of phrases along the lines of “based on a general assessment”. Alarm bells sound whenever we see them, especially with any frequency, as they are liable to conceal rather than illuminate the true rationale. JEL codes: E580, K10 Keywords: Central Bank Organization, Constitutional Court, Constitutional Law, Constitutional Rights, Supreme Court 4 2 Word cloud for the Brexit judgement 2 The Brexit judgement is discussed in 3.8.4 below. 5 Contents: 1 Introduction .................................................................................................................... 7 2 Central banks ................................................................................................................. 9 2.1 Towards greater transparency ................................................................................. 9 2.2 On decision-making processes ..............................................................................11 2.3 Criteria for good justifications for central bank decisions ........................................12 2.4 Illustration of the criteria with examples from selected central banks ......................28 3. Supreme courts ................................................................................................................38 3.1. Introduction and scope ...............................................................................................38
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