• rmacculloch

Who do you believe on the financial stability risks posed by climate change?

John Cochrane, at the Hoover Institute at Stanford University says:

"Central banks are rushing headlong into climate policy. This is a mistake. It will destroy central banks’ independence, their ability to fulfill their main missions to control inflation & stem financial crises, & people’s faith in their impartiality & technical competence. And it won’t help the climate. In making this argument, I do not claim that climate change is fake or unimportant. None of the following comments reflect any argument with scientific fact. Let me point out the unclothed emperor: climate change does not pose any financial risk at the one-, five-, or even ten-year horizon at which one can conceivably assess the risk to bank assets. Repeating the contrary in speeches does not make it so".


Adrian Orr at the Reserve Bank of NZ, who stated a few days ago in a Press Release that:

"The financial stability risks associated with climate change are significant, necessitating an urgent & collaborative response".

By the way, when it comes to qualifications to help one assess risks to the financial system, here's Cochrane's resume: "Cochrane was born in Chicago. He attended the Massachussetts Institute of Technology and graduated in 1979 with a BSc in physics. He then did graduate study in economics at the University of California, Berkeley, and received a PhD in 1986. He worked as a junior economist on the President's Council of Economic Advisers from 1982 to 1983. Cochrane was hired by the University of Chicago economics department in 1986 and moved to the business school in 1993 where he was the AQR Capital Management Distinguished Service Professor of Finance. Cochrane served as head of the National Bureau of Economic Research asset pricing group, and was the Editor of the Journal of Political Economy from 1998 to 2003. He was elected Fellow of the Econometric Society in 2001 and was elected President of the American Finance Association in 2008, and for the 2010 term".

.. which would clearly rule him out for a job at the RBNZ, particularly given his views on the risks to the financial system posed by climate change are inconsistent with the Bank's.