Thinking more about transparency (which I just wrote about), it occurred to me that I neglected two pieces (of many) that are relevant for the point about transparency of decision-making in bodies like the Federal Open Market Committee (FOMC) in which expertise plays an important role in justifying the body’s authority.

David Stasavage and Ellen Meade made use of a great (and entirely on point) data set in their analysis of the effect of transparency on FOMC decision-making in their Economic Journal article, “Publicity of Debate and the Incentive to Dissent: Evidence from the US Federal Reserve.” They find strong evidence that, once members knew their statements were being recorded, both the content of their opinions and their individual votes on monetary decisions changed.  

The general implications of this point from a theoretical perspective are nicely laid out in Stasavage’s Journal of Politics article, “Polarization and Publicity: Rethinking the Benefits of Deliberative Democracy.” Transparency can affect individual incentives, particularly among career-motivated decision-makers.  If one presumes that the decision-makers in a deliberative are motivated to “look good” by making good decisions, and one is mostly or wholly concerned with the quality of their performance then, in a specific sense, transparency of individual decision-makers’ opinions and votes can “only hurt” actual performance, because the decision-makers are not worried not only about the performance of their collective decisions (e.g., the actual inflation rate), but also by how their individual opinions/inputs are viewed.

Why Have Transparency At All, Then?

There are two broad categories of theoretical arguments in favor of transparency.  The first of these is screening and the second is record-keeping.

Screening. Recall that the problems with transparency sketched out above and in my previous post follow from the presumption that some or all of the decision-makers are interested in being rewarded and/or retained by voters/Congress/the president or whomever else might employ them in the future.  This “career-concerns model” of course implies that somebody else is going to be considering whether to retain, hire, or promote these decision-makers again in the future.  I’ll leave the details to the side for now and simply note that, if the “next job” for which they will be considered is sufficiently important relative to the current job, the ability to possibly infer something about the relative expertise or abilities of the decision-makers might be sufficiently valuable to warrant introducing some “noise” into the current decision-making.[1]

Record-Keeping. Nobody lives forever.  Many decision-making bodies that have authority because it is believed that expert decision-making can and should be used to set policy exist for many years, with decision-makers rotating in and out.  In such situations, because one is leveraging expertise as a justification, one might think that past experience can inform future decisions.  Steve Callander has recently published several excellent articles (here, here, and here) that offer a good starting point (unexplored as far as I know) for us to consider the types situations in which transparency can be helpful by allowing future decision-makers to not only observe past performance, but also learn how policy decisions actually affect outcomes by observing the details of the decisions that produced those outcomes.

Note that this argument, as opposed to the screening argument above, leaves room for one to think meaningfully about the proper “lag” or delay of transparency.  As the evolution of FOMC policy illustrates, many transparency policies involve a delay between decision and publication.[2] Interesting aspects of the policy process, such as how much information is conveyed by more recent versus older decisions, would presumably play a role in the final derivation of how much transparency is optimal.

Conclusions. If there’s any grand conclusion from this post, it’s that I think there’s a lot of important topics left in the study of transparency, and as social science theorists we should start thinking about getting closer to the “policy technology side” of the decision(s) being made.  Abstract static models provide a lot of very key and portable insights.  But they can take us only so far.

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[1] Of course, if transparency in the current decision process leads every decision-maker to “pool” and do the same thing, regardless of their type, then one can’t infer anything about the decision-makers from their decision, thereby obviating this argument for transparency.  This will be the case when the decision-makers are sufficiently motivated to “get hired in the next job” relative to their innate preference to “make the right decision” in the current matter at hand.  In the FOMC, this would be an FOMC member who cares a lot more about becoming (say) Fed Chairman someday than he or she does about getting monetary policy “right” today.

[2] This type of argument, combined with career concerns, would also allow us to think in more detail about to whom the decisions ought to be made transparent and from whom this information should be withheld.