The nature of central banking

In this article we argue that we can more easily understand the duality of central banks (CBs) and independent central banks (ICBs) through an understanding of their underlying dualities. As we explore, heterodox and orthodox views and methodologies present two distinct ways of conceptualizing all that is involved in economic activity, and correspond to a social interpretation and a market interpretation of economics. This clear dividing line can be traced between visions of individuals, society, money and banking, and indeed central banking and independent central banking. As we will show, CBs and ICBs have well recognized – but poorly classified – distinctions that allow for a clear separation between their natures. Once revealed as quite distinct institutions, the public policy decision of maintaining independent central banks more fully aligns with the disastrous history of such institutions on the well being of national economies.