Nick Rowe suggests that perhaps there should be performance pay for central bankers based on how well they do to hitting their inflation target.
In the case of the United States, at a minimum it would be to actually have a target out in the open. In many ways, the Federal Reserve is one of our highest functioning public agencies. In other ways, though, it suffers from incredible fogginess about its basic mission. The so-called “dual mandate” is, in effect, a clever way for the central bank to avoid accountability and for congress and the president to maintain some leverage over the bank without taking any responsibility for outcomes. If congress gave the bank a specific mandate — an inflation rate target, a price-level path target, a nominal GDP target, etc. — then at least from the point of view of political criticism you could say “we can tell Ben Bernanke is doing a good job because we’re hitting our targets.” Or you could say “it’s true that we’re not hitting our targets, but we’re doing better than the other major central banks so we can tell that Ben Bernanke is doing a good job under bad circumstances.” Or congress might haul him in and say “how come you’re so far off target?” and he might have a convincing reply or else he might not. Instead we get a lot of hand-waving, a lot of posturing, a lot of shadow-boxing, and the kind of silly debate over auditing the Fed when we should be talking about measuring its performance.