Ladies and gentlemen

This lecture series is a tribute to the legacy of Karl Brunner. In his lifetime, Karl Brunner was a leading figure in monetarism, and his work remains highly influential to this day. He had a profound impact on the Swiss National Bank's monetary policy approach in the 1970s and 80s. Brunner was also critical of central banks. They rely too heavily on judgement, he believed. Brunner preferred rules. This is something he has in common with our speaker today. He also tends to prefer rules over discretion. But before I introduce him, let me first extend my sincere gratitude to Joël Mesot and ETH Zurich for hosting us. It's always a pleasure to be here at ETH Zurich.

Our speaker, John Cochrane, is a renowned Professor of Finance and Economics at the Stanford Graduate School of Business and a Senior Fellow at the Hoover Institution. His background is as fascinating as it is impressive. In his blog, he calls himself 'the grumpy economist'. Apparently, his kids called him that after a rant at the dinner table. But I can assure you that he's a pleasure to talk to, as I have experienced first-hand.

John's career path was not always straightforward. He started his academic journey with a Bachelor's degree in physics at MIT, before deciding to study economics. He's in good company. Other notable figures, like Bertrand Russell and Max Planck, also ventured into economics after starting their careers in the 'exact sciences'. Planck is said to have dropped economics because he found it too difficult. And Russell is said to have dropped it because he found it too easy. I don't know whether John finds economics difficult or easy - but I'm glad that he went on to pursue a PhD in economics rather than physics.

But where? He applied to a few places. Two accepted him, Berkeley and Chicago. He chose Berkeley, because he knew that it doesn't snow there. After earning his PhD, John moved to Chicago. He appreciated the intellectual environment and the tough but honest debates there. For more than two decades, he was a professor at Chicago's Booth School of Business, before joining Stanford.

John is a prolific writer. His work spans many branches of economics - financial economics, macroeconomics and monetary policy. His research has very influential, and his ideas continue to shape the field. But one thing really sets him apart: John often has surprising insights that go against the consensus. I would like to briefly touch on three of these insights. I have picked these three because they are particularly thought-provoking from the point of view of a central bank.

The first insight is about financial regulation. John argues that regulators should not rely on rules that he regards as 'long, vague and complex'. For him, such rules are basically the same as discretion. Instead, he says, regulators should focus on one thing: making sure that financial institutions have enough capital. The exact definition of 'enough' is being hotly debated right now in Switzerland.

The second insight is about the link between inflation and interest rates. Normally, central banks figure that if they raise interest rates, inflation will go down. John brought the opposite effect into mainstream macroeconomic models. The neo-Fisher effect states that high rates might actually lead to high inflation. Why? Because when people see high rates, they might expect high inflation in the future.

The third insight is about the link between inflation and fiscal policy. According to John's most important book, The Fiscal Theory of the Price Level, in the end, inflation is determined by fiscal policy: unbacked increases in fiscal spending translate into inflation. In Switzerland we enjoy both low public debt and low inflation. That would seem to support John's theory.

Today, John will present his thoughts on inflation. I am honoured that he has joined us in Switzerland, and I'm sure that you will enjoy his lecture.

Please join me in welcoming John Cochrane to the stage. Ladies and gentlemen, let's give him a warm welcome!