Are Two Heads Better than One? Monetary Policy by Committee

Two experiments were conducted to test the common hypothesis that groups make decisions more slowly than individuals. One of these experiments imitates real-life monetary policy decisions. In both cases, the hypothesis is found wanting: groups are not slower than individuals. In both experiments, we...

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Bibliographic Details
Published in:Journal of money, credit and banking credit and banking, 2005-10, Vol.37 (5), p.789-811
Main Authors: Blinder, Alan S., Morgan, John
Format: Article
Language:English
Subjects:
Analysis
Bank credit
Central banks
Decision making
Econometric models
Economic models
Experiments
Games
Group decision making
Group dynamics
Hypotheses
Hypothesis testing
Inflation rates
Interest rates
Majority rule
Mathematical models
Monetary policy
Policy analysis
Policy making
Standard deviation
Studies
U.S.A
Unemployment
Citations: Items that cite this one
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Summary:Two experiments were conducted to test the common hypothesis that groups make decisions more slowly than individuals. One of these experiments imitates real-life monetary policy decisions. In both cases, the hypothesis is found wanting: groups are not slower than individuals. In both experiments, we also find that group decisions are on average better than individual decisions. This holds regardless of whether the groups make decisions by unanimity or majority rule. Simple mechanical theories of group decisionmaking-that the group follows its average player, median player, or best player-do not explain the results. Group interactions seem to matter.
ISSN:0022-2879
1538-4616
1538-4616
DOI:10.1353/mcb.2005.0048