For preferences not to be single-peaked members of the Committee would have to prefer, for example, both no change  BIS Review 34/2002  7  and a rise of 50 basis points to an increase of 25 basis points. It is not easy to see under what circumstances this would represent rational preferences. Third, the set, or as we call it suite, of models used by the Committee should be improved. They are in fact under continuous improvement and the Bank has commissioned Adrian Pagan to carry out a review of the technical aspects of modelling in the Bank. That review will be published in 2003. Fourth, it has been suggested that the MPC should meet outside London. The Court of the Bank does indeed meet once a year at a destination outside London, and these occasions have proved invaluable in expanding contacts between the Bank and the MPC on the one hand, and the local community, on the other. But MPC meetings themselves, as highly market-sensitive occasions surrounded by a purdah period, are quite unsuitable as opportunities to interact with the local business and other community. There would be little point in holding an MPC meeting outside London if the Committee were unable to speak and meet with local people. All members of the MPC travel widely around the UK outside of purdah, making some 50 visits during the past year, and these contacts are an important part of the process by which the MPC is informed about the state of the economy.
The second asked participants to play a simple monetary policy game, setting a short-term interest rate in order to minimise a loss function described by deviations of unemployment and inflation from desired target levels. The data generating outcomes for this hypothetical economy came from a two equation macroeconomic model of a fairly standard kind. Again a structural change - this time to the “natural” real rate of interest - would occur at some point during the game, and, by observing data generated by this economy, players would need to learn about the change in structure in order to set the appropriate interest rate. All the students who participated played both as individuals and in a group. In both experiments success could be measured on a quantitative scale, and both led to a common conclusion: that decisions made by committees were superior to those of individuals. How robust was this result? And what explained it? Last year, a team from the Bank of England attempted an exercise very much like Blinder and Morgan’s monetary policy experiments using a sample of just under 200 economics students from the 3 London School of Economics. Using a simple macroeconomic model that was broadly representative of the UK economy, the experiments examined how the performance of groups differed from that of individuals. And again they found striking evidence that committee decisions were superior.