Why So Few Dissents on FOMC?

From Fed Vice Chairman Donald Kohn who is heading a panel discussion today on expertise and monetary policy at the American Economics Association annual meeting in New Orleans.

Kohn said there were primarily two reasons why we see so few dissents on FOMC decision days:

1. Unless there is a grievous error being made, board members are hesitant to dissent because they feel any small mistakes by the majority will eventually correct themselves and future decisions will be aligned with the quiet dissenter's view.

2. It would hurt the authority of the institution.

Where dissent does show up is through the different forecasts of FOMC members (largely those of regional bank presidents who have their own research staffs). For example, Kohn said, forecasts for Q2 2008 GDP varied by 1 percent and for 2010 there is disagreement on the order of 0.5 percent.

Two very interesting papers are also being presented at the panel:

Does Leadership Produce Better Monetary Policy?

Expertise and Monetary Policy: The FOMC versus the Staff

Update 3:42 P.M.
Later in the session, as talk turned to the second paper above which finds that the forecasting ability of FOMC members is wanting, Kohn talked a bit about the Greenspan Fed in the 1990's. This statement surprised me:

"overtime the leader proved himself to have more insight than the median committee member did."

The leader of course was Greenspan, and what Kohn was saying was that the Maestro's forecasting ability was so good that the rest of the FOMC members let him steer the ship completely. I wonder if in retrospect Kohn thinks that might have been a bad decision given some of the asset bubbles we've seen over the past decade. I got the impression that he didn't.

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