In practice, the evidence suggests progress towards improving the public’s understanding of the economy, finance and central banks has been slow and patchy, despite these initiatives. To start with the positives, there is concrete evidence of the improved central bank communications having improved the functioning of financial markets, the forecasting performance of economists and even the reporting of the media on the economy. 13  The transparency revolution improved understanding among those  whose day job it was to understand the economy and the role of central banks within it – the experts. The revolution appears to have had far less impact on understanding among the public – the non-experts. In 1999, the Bank of England began surveying the public to gauge their understanding of the economy and the 14  Bank. Back then, only around 7% identified the Bank’s Monetary Policy Committee (MPC) as responsible  for setting interest rates. 19 years and one transparency revolution later, the same survey earlier this year suggested around 6% of the general public had heard of the MPC. 15  The failure to boost understanding of the economy and central banks among the general public helps explain why trust in central banks proved more fragile than expected after the crisis. It is for these reasons I have spoken about central banks facing a “twin deficits” problem – a deficit of public understanding and a deficit of public trust. 16  These twin deficits are clearly complementary and mutually-reinforcing.
These twin deficits have not, so far at least, had especially serious consequences for central banks. There has been no de-anchoring of inflation expectations. There has been no rolling-back of central bank responsibilities nor systematic retreat from central bank operational independence on monetary and regulatory matters. If anything, central banks’ sets of responsibilities have recently been added to. At the same time, more questions are probably being asked about the role and powers of central bank than at any time in a generation. That is in part a reflection of the increased responsibilities central banks have been handed; in part a reflection of the higher expectations being placed on central banks’ actions; and in part a reflection of the dent in trust in institutions the crisis has delivered. This is a triple challenge. A year ago, the Bank of England hosted a conference to mark 20 years since it was granted operational independence for monetary policy. At that event, I was struck by the number of speakers calling time on the  13  For example, Gürkaynak, Sack and Swanson (2005), Gürkaynak, Levin and Swanson (2010), Berger, Ehrmann, and Fratzscher (2011). 14 Bank of England Inflation Attitudes Survey, currently run jointly with TNS. 15 The same survey also gives the “Bank of England” as option to the question of which group sets interest rates. More respondents identify the Bank of England as being responsible for setting interest rates (around 30%) than the Monetary Policy Committee, but this too has been broadly flat over time.