In Norway, we have something called the spending rule, or 'håndlingsregel', which you, as a brilliant student of Economics, worked on, and then as a Minister of Finance and Prime Minister. It's a rule which tells how much of the Norwegian sovereign wealth fund can be spent every year to support the budget, and it has truly been a cornerstone in the economic planning of this country.

The purpose was actually twofold: one was to ensure that not only our generation but also future generations would benefit from the oil and gas resources we found on the Norwegian continental shelf – that's the long-term perspective. The other reason to establish the fiscal rule and the pension fund was to stabilize the Norwegian economy, to separate earnings from spending, and to prevent the economy from overheating.

What inspired the creation of this rule was the understanding that Norway was going to receive much larger oil and gas revenues than we had expected. Therefore, when I was Prime Minister in 2000, we had only had net oil revenues for a few years; the first net oil revenues came to Norway in 1996, and initially they were quite small. It then became obvious that we needed a way to decide how much we could spend, and we were very afraid of what we referred to as Dutch disease, meaning spending too much. Consequently, we initiated both an academic and a political discussion on how to establish a fiscal rule for how much of the oil revenues we could spend.

Therefore, we established a pension fund, and the first money was allocated to it in 1996. But perhaps equally important was this fiscal rule, where we decided that all oil and gas revenues would go into the Norwegian pension fund, and that the only thing we would spend was the financial return, which we estimate to be an average of 3% in yield terms per year. Thus, the fiscal rule states that we should only spend, on average, the estimated 3% fiscal return, and that has served Norway very well.

It's quite a feat to manage to get political consensus around the spending of such vast resources, and it's probably one of the main successes of the fund. Has it worked the way you thought? Yes, and if anything, it has worked even better, partly because the fund has become much bigger than we expected for many reasons: oil and gas production on the Norwegian continental shelf has been greater, prices have been higher, and we've also had good investments because people like you have been able to manage the fund very well. So, the combination of all these things has made the fund much bigger and, therefore, the fiscal rule even more important.

If, at the time the fiscal rule was made, you had also created a rule for how much, in total, the fund could contribute as a percentage of the budget, what do you think that percentage would have been? I think it would have been lower than the current percentage, which I believe is now around 25%, or roughly almost one-quarter of the Norwegian state expenditure or state budget, financed by the return from the oil fund. So, instead of 25%, what do you think it would have been? I'm not able to give you an exact number, but I think it's important to understand that there are concerns, and I'm careful not to delve too much into that debate because it's a very Norwegian debate, and I'm careful about being too specific on issues I haven't worked closely with in recent years.

But I think the idea back in 2000, when we made the fiscal rule, was that it could last forever because, in a way, Norway has spent zero of the oil revenues; the only thing we have spent is the fiscal return on the oil revenues. And of course, that can last forever, as long as we have the investment. The challenge, and you know that better than anyone else, is that we now have so much of our wealth in the stock market, which means there can be big fluctuations that can impact the Norwegian economy. That's a new risk we didn't face, at least not in the same way, before.

So, I'm always a bit careful about changing these kinds of fiscal rules too often, because that will undermine their credibility. Perhaps it's better to have an imperfect rule that is credible than to always try to strive for a more perfect rule that is constantly changed. This is because it is a self-imposed restriction, and the biggest success, in a way, is that a democratic society like Norway has been able to handle this enormous amount of cash without spending it.

I remember back in the 1990s, when we had this discussion and started to invest in equities and made the first allocation to the pension fund, many experts, including economist colleagues of mine, said this could not happen. They argued that democratic institutions and politicians would spend the money if they got it. So, they were actually in favor of reducing oil and gas production to keep the wealth in the continental shelf. In fact, the former Governor of the Norwegian Central Bank, Bank Har Scan, led an expert group, and they said it cannot work; politicians will spend if they get the money. We have proven them wrong, and that's the biggest success. But again, if you start to change these rules too often, you may undermine, in a way, the magic of the 'Line in the Sand,' which is the fiscal rule. I think we can say, 'Well done, Norwegian politicians,' and 'Well done, the Minister of Finance and the management of Norges Bank Investment Management,' who have all been responsible.