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Committees Set Rates Better Than Individuals

May 27, 2005
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.

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