The Discursive Dilemma in Monetary Policy

The discursive dilemma implies that the policy decision of a board of policymakers depends on whether the board reaches the decision by voting directly on policy (conclusion-based procedure), or by voting on the premises for the decision (premise-based procedure). We derive results showing when the discursive dilemma may occur, both in a general model and in a standard monetary policy model. When the board aggregates by majority voting, a discursive dilemma can occur if either (i) the relationship between the premise and the decision is nonmonotonic, or (ii) if the board members have different judgments on at least two of the premises. Normatively, a premise-based procedure tends to give better decisions when there is disagreement on parameters of the model