Working Paper: CEPR ID: DP5626
Authors: Anne Sibert
Abstract: There is a small, but growing, economics literature on the importance and effects of having monetary policy made by a committee, rather than by an individual. Complimenting this is an older and larger body of literature on groups in the other social sciences, particular in social psychology. This paper provides a review of some of this work, focussing on two important features of committees: the effect of their size on performance and whether or not they are more moderate than the members who make them up. The results of the literature on committee size and committee polarization suggest that the ideal monetary policy committee may not have many more than five members. It should have a well-defined objective and it should publish the votes of its members. It should be structured so that members do not act as part of a group, perhaps by having short terms in office and members from outside the central bank. External scrutiny of the decision-making process should be encouraged.
Keywords: committee size; groupthink; social loafing
JEL Codes: E50; E58
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Committee size (D71) | Performance (D29) |
| Committee size (D71) | Decision-making outcomes (D91) |
| Access to more information and resources (I24) | Better decision-making outcomes (D91) |
| Committee size (D71) | Free-riding (H40) |
| Free-riding (H40) | Worse decision-making outcomes (D91) |
| Committee membership (D71) | Group polarization (C92) |
| Aggregation of views (E10) | More extreme outcomes (C46) |
| Committee size (D71) | Optimal size for a monetary policy committee (E52) |
| Larger committees (D72) | Increased social loafing (C92) |
| Larger committees (D72) | Coordination issues (E61) |