Why Fed Heads Don’t Fight

Darn, those Fed officials are agreeable folks. Doesn’t matter what the decision is, everyone is in (generally) unanimous agreement. Inflation? Rate cuts? Disinflation? Rate increases? We agree! We agree again!

Or do they. A new paper makes the case that having Fed deliberations become public has decreased the likelihood of disagreements. Is the Fed papering over things, to our collective disadvantage? You be be the judge:

Publicity of Debate and the Incentive to Dissent: Evidence from the US Federal Reserve*
The Economic Journal, Vol. 118, Issue 528, pp. 695-717, April 2008

Transparency in committee decision making may have clear benefits by making members more accountable to outside observers. We consider one potential cost: the possibility that publishing records of deliberations will make members more reluctant to offer dissenting opinions. We construct a model that compares incentives for members with career concerns to voice dissent when deliberations occur in public or in private. We test the model using an original dataset based on deliberations of the Federal Reserve’s Federal Open Market Committee, asking whether the FOMC’s 1993 decision to begin releasing transcripts of its meetings has altered incentives for dissent. We find evidence that this is indeed the case.