THE old jokes about the uselessness of committees go unheeded in the world's central banks. Most of them rely on several heads to set interest rates. An experiment* by three economists at the Bank of England—which eight years ago this month took over rate-setting powers from the once omnipotent chancellor of the exchequer, and has enjoyed conspicuous success since—suggests that collective wisdom is exactly that.

The researchers took a gang of economically literate students from the London School of Economics and tried to replicate the deliberations of the Bank of England's Monetary Policy Committee. They found, as previous studies have done, that committees reach better decisions than individuals do. They also asked why this might be.

Working alone at the beginning and end of the experiment, and in committees the rest of the time, the students attempted to manage a notional economy via interest rates. They knew little about how their toy economy was supposed to work, but were expected to infer more from the responses of inflation and output to changes in interest rates. The economy was also subject to unpredictable external shocks, both large and small.

The average score in committee was far higher than the average in individual sessions. It was also better than all but the best individual scores. Although performance improved between the two sets of solo exercises, individuals did worse even in the final rounds than they had in committee. They were more aggressive in changing rates than the underlying model required 92% of the time, against the committee's 9%.

One possible explanation for the superiority of committees is that majority voting cancels out the worst performers. The experiment bears that out. Another is that committees allow individuals to share knowledge. This, it turns out, is true too—but curiously, committees that were permitted to discuss their decisions did slightly worse than those that were not. The researchers find this hard to accept, and think that in real life talk has much to recommend it.

But other studies suggest that groups which discuss the job at hand may be too swayed by the alpha arguer among them. That is an argument against the domination of a rate-setting committee by a single individual—and is one reason why the departure, due next January, of Alan Greenspan, long-serving chairman of America's Federal Reserve, might be less worrying than it seems.

* “Committees Versus Individuals: An Experimental Analysis of Monetary Policy Decision Making”, by Clare Lombardelli, James Proudman and James Talbot. International Journal of Central Banking, May 2005