Jon Cunliffe: The outlook for countercyclical macroprudential policy Speech by Sir Jon Cunliffe, Deputy Governor for Financial Stability of the Bank of England, at The Graduate Institute, Geneva, 10 November 2015. *  *  *  In 1909, Albert Einstein received his first honorary doctorate from the University of Geneva. In 1905, in his mid-twenties, Einstein published four papers which ushered out the Newtonian age of physics and changed forever our view of the Universe in which we live. It is an interesting experiment to think what Einstein might have accomplished had he chosen the world of economic policy rather than physics. Would he have brought to our world the same brilliant simplicity and achieved the same lasting change in our understanding? Economic policy of course is rather different to physics even in central banks. We may aspire to the same rigour, the same evidential base, the same level of proof. And we may apply many of the mathematical tools. But our world is more indeterminate and shot through with the vagaries of human behaviour. As policy makers, we have on a daily basis to take decisions on the basis of both imperfect information and imperfect understanding. The subject I want to talk about today, the credit cycle and how policy makers charged with financial stability should take it into account, is a very good example of this world. The concept itself is a difficult one.
No: the transformation of the Banque de France is a modest but real illustration of such a reform; for years we have been lowering costs and providing greater services, while maintaining our territorial  Page 8 of 9 presence. I am not saying that efficient public management is easy, but I guarantee that it is possible. Better budgetary control will then be compatible with better financing of the most productive expenditures, which must be prioritised - these difficult choices are obviously a matter for democratic debate. The comparison with our neighbours only seems to indicate that in France, for example, spending on pensions, or "economic affairs" (subsidies and tax credits) is much higher.iv Some futureoriented expenditures (most investments - even if some of them are less useful - but also spending on education and research) have a crucial effect on growth, both in the short term and in the long term. France cannot and must not settle for a potential growth rate of 1.2/1.3%v if it aims to return to full employment and lower its debt in the coming decade. Focusing the debate on the quality of public spending  *** I would like to conclude with two authors who are not very “budgetary”. First, La Fontaine, The Swallow and the Little Birds: "To instincts not our own we give no credit, and till misfortune comes, we never dread it". Let us finally aim to anticipate our budgetary difficulties, in order to reduce them.