Committees Set Rates Better Than Individuals
So, here's a study from the Bank of England in which the setting of interest rates by a notional central bank for a modelled economy is found to be consistently better when done by committees than when done by lone members of these committees.
It tempts one to propose an extended experiment with bigger committees. In fact, the committees could be expanded to include everyone who might want to loan or borrow money, but be limited to people who were setting rates with and for their own money.
If this worked out promisingly (at least within the modelled economy), perhaps the central bank could be done away with entirely, with people setting rates not for the bank, but for their own transactions. And the model economy could be dispensed with in favor of what this really would be: a market.
Comments (3)
Horatio
Priceless. I knew exactly where this was leading.
Published: May 28, 2005 8:20 AM
Jim King
I disagree with Mr Rounds. If the social security bonds issued by the Federal government are no good then our entire economy is in grave trouble. He should understand that these bonds are issued to the people of America , not the United States and these bonds are a contract between the Federal government and the people. If they are not backed by full faith and crdit of the United States, then it is just as easy to declare that none of the bonds issued by the United States have any value and if that is construed as the case, the government defaults on millions of dollars worth of bonds held by private citizens and the word and issuance of the Federal government has no value. Just hearing this kind of talk prompts me to sell all my government bonds and securities and invest elsewhere. If this turns into a deluge of selling all across America, the Federal government will be in serious trouble. Mr Rounds should thisk these things through before he makes such risky statements. Social Security has never been a welfare program and that is an insult to all the people who have worked a lifetime paying into it and an insult to both those paying into it now and those recieving benefits now. It is a self paying retirement investment program, not a welfare program of any kind. If congress, at its whim attempts to dismantle it, you will see a whole new congress next year. Think the Republicans have gone to far to save themselves already. I think next election will reveal what the American people think of these efforts to defeat Social Security and many other programs. I think the people have seen enough of the Republicans and are trending back to the Democrats. That is probably the reason many Republicans are backing away from the Bush policies. They know they are rapidly becoming an endangered species. Watch a new Democeatic tide sweep into Congress next election. You heard it here first!
Published: May 29, 2005 4:20 PM
Brent Nelson
Bookies as a group are better (on average) at predicting many events, such as who will be elected pontiff. According to this paper, that means we should let the bookies pick the next pope.
Of course! Of course, given a math problem, groups of students will perform better on average than individual students will perform on average. Because only the dullest student would be unable to grasp the correct answer when someone in their group explains it to them. As long as someone in the group knows the answer, and the majority of the rest have just enough understanding to follow the logic, the group will vote the correct answer more often.
But that's a given mathematical formula with a given target answer. Are they really suggesting that an individual central banker is so likely to screw up a mechanical calculation that he needs a buddy system to do the math? Yes, heaven help us, they are!
The experiment shows nothing about how the calculation relates to real life. It has nothing to do with economics. Or even math. Perform the same experiment with history students: Make them name the kings of France or something. The average score of the groups will be better than the average of individual students. It signifies nothing.
Prizes are given for the correct calculation. That utterly fails to make the students entrepreneurs. It adds no validity to the conclusion: That *all decisions should be made by committee*
Well then, we should have a committee vote on what I want for dinner. I am willing to concede that the committee will score higher on average as a collective than they do as individuals. It most emphatically does not make them the best cooks. As long as the authors are set on "experimenting" on these sorts of things, here are some areas for further exploration:
Published: May 30, 2005 5:20 PM