245policies is an inherently political process that should be taken care of by governments, not by independent bodies such as central banks. What will the central banks do? Will they feel obliged to intervene with unconventional (now structural) monetary tools to tackle the next crisis? Maybe the choice to use unconventional C. Amenta and C. Stagnaro

246tools in exceptional circumstances to mitigate the effect of the financial crisis put in peril the independence of central banks, putting all the pressures on the shoulders of boards that must resist the calls by politicians to act. Nevertheless, now that these tools are used extensively, we need more neutrality and clear guidelines from central banks to avoid distortions in markets and capital allocation.

Central banks’ independence, authority, and credibility have been essential features that have allowed us to enjoy a long period of low inflation and financial stability. Their boldness in using unconventional monetary tools when needed stems from their independence from political power. However, power corrupts, and absolute power corrupts absolutely. Unconventional and temporary interventions have become structural and permanent, and the desire to play God in deciding winners and losers on the markets is tempting but is also dangerous for financial stability and the proper functioning of the markets. The state already has enough power and through the democratic process, the legitimacy to intervene in the market, even if the results are very often disappointing. Imagine what could happen if its most powerful ally is a formally independent central bank that becomes an entrepreneur without the proper checks of a democratic process that appoint its representatives (Cochrane, 2020).

7

Conclusion

This chapter has reviewed one prominent example of the entrepreneurial state and so-called mission-oriented innovation in practice, i.e., Europe’s policy of subsidizing renewable energy sources. The European Union and its member states have consistently pushed toward making investments in renewable energies as a flagship