Committees versus individuals: an experimental analysis of monetary policy decision-making

Working papers set out research in progress by our staff, with the aim of encouraging comments and debate.

Published on 20 September 2002

We report the results of an experimental analysis of monetary policy decision-making under uncertainty. We used a large sample of economically literate undergraduate and postgraduate students from the London School of Economics to play a simple monetary policy game, both as individuals and in committees of five players. Our findings – that groups make better decisions than individuals – accord with previous work by Blinder and Morgan. We also attempt to establish why group decision-making is superior. Our results show that some of the benefit is related to the ability of committees to strip out the effect of bad play in any given period. But there is a significant additional improvement, which we associate with the ability of committee members to share information and learn from each other by observing other members’ interest rate responses. One surprising result is that the superiority of committee decision-making does not appear to be related to the ability to discuss the interest rate decision.