SO FAR, I have focused on the link between elite policy makers, the institutions they inhabit, and economic performance. But there is another side to policy making: democratic representation and the transmission of public preferences through elections into public policy. Because there seems to be a tension between democratic control of monetary policy and effciency, modern central banking is a sore point for democratic theory. Delegation to a relatively conservative, independent central bank lowers inflation but yet sacrifices democratic responsiveness. If there were a one-size-fits-all monetary regime that produced Pareto optimal inflation and unemployment, central banking would be a purely technical issue, but inflation reduction comes at a price – sharper short-run swings in unemployment. The optimal degree of central banker conservatism therefore depends on the people's preferences (Stiglitz, 1998). Where elected governments lose the ability to set even the degree of conservatism of the central bank, the basic chain of democratic responsiveness is broken, and from a democratic perspective, the wrong monetary policy may be adopted.