In her book, Cheryl Schonhardt-Bailey seeks to analyze the “thinking of policy makers” in an effort to understand how deliberation affects decisions. Her goal is not to understand or explain monetary policy outcomes per se but the process that takes place within the Federal Reserve Bank (Fed) and between the Fed and Congress. The process of monetary policymaking is particularly important not only because the decisions made by the Open Market Committee (FOMC) have significant domestic and international political and economic implications but because once taken, these decisions are the law of the land. That is, once its chair and the governors have been appointed by the President and confirmed by the Senate and the economic objectives of the Fed remain unchanged by Congress, there are no veto points when it comes to Fed decisions and that is why understanding its internal dynamic is so important. The decidedly non-democratic process is balanced by the publication of the minutes after a few weeks of the meeting. This compares favorably with the European Central Bank which, until February of this year, ten years after its creation, had never published an account of its meetings and still does not reveal how its members vote. Finally, while the FOMC decisions cannot be reversed by elected officials, the US House and Senate play a continuing role in monetary policy in the form of ex post accountability and Schonhardt-Bailey seeks to shed light on their deliberation as well.

This book makes a number of important contributions to the literature on deliberation and policymaking, in general and US monetary policy, in particular. First, it challenges the reader to understand policymaking not only as a function of the rules of the game but also as a function of deliberation, a less precise and predictable variable. Second, it takes on the challenge of defining deliberation and offering a systematic way to measure it. While we are generally in agreement that deliberation is a good thing, we find it more difficult to determine what constitutes deliberation and exactly how it shapes policy outcomes. Understanding deliberation is a much harder enterprise than the proverbial, “I know it when I see it.” Does deliberation occur when all of the participants are able to voice their preferences? Does it occur only when the participants are technical experts, as we assume are the members of the FOMC or also when they are not, as we suspect are members of Congress? Does deliberation occur only when participants’ minds change? How do we know that the deliberation that we observed is the one that matters as opposed to the one that we cannot observe? The possibilities are endless and more complicated when the deliberation in question is about a highly technical issue with tremendous political and economic implications. Schonhardt-Bailey argues that we observe deliberation when “members of the FOMC and legislators [provide] reasons for their claims and positions, and in turn, also [respond] to others’ reasons and counter arguments.” For the author, the actors involved need to engage in persuasion and be willing to be persuaded as well.

A third contribution of this work is the use of computer-based textual analysis. Schonhardt-Bailey examines 33 years worth of speeches, arguments and comments from the FOMC and congressional hearings in an effort to tease out the role of ideas in the process. She valiantly refuses to accept the critics who argue that textual analysis is nothing more that a “‘mechanical exercise’ of little value” (p. 3). And, to validate her findings, she conducts interviews with two dozen former Fed officials, including Paul Volcker, and former members of Congress and aides. Fourth, the work is exceptional because it analyses the policymaking dynamics and interactions of two different set of actors, appointed and elected officials, with first hand responsibility over monetary policy. All too often students of policymaking limit their work to the legislative or to the executive, rule-making arena, thereby limiting our understanding of the process and the outcomes. Finally, the magnitude of the work is extensive, covering the tenure of five chairmen, and the contribution to our understanding of the shift to and institutionalization of low inflation policy important one. I agree with the author that, because of its highly technical nature, understanding monetary policy has far too often been an exercise of trying to predict and understand the impact of policy decisions and less about understanding the process. Most existing scholarly work has been about inferring the causes of change rather than about analyzing the primary sources of data—the transcripts, as opposed to just the votes.

Computer-based textual analysis enables the researcher to analyze large quantities of textual data, which might be impossible task otherwise and perhaps even unnecessary. However, the emphasis on the value of analyzing large quantities of textual data may have contributed to some of the weaknesses of the study. I am particularly puzzled by the author’s insistence that her analysis is about understanding the process and not the outcome; understanding the process is important precisely because the outcome is important, and that is how the empirical chapters are framed. Chapter three, for example, is devoted the the “Volcker Revolution” of 1979, and the permanent shift to a persistent record of low inflation. The author finds evidence that deliberation mattered when it comes to explaining the shift in policy, but so does the strategizing by Volcker, the state of the economy (i.e. the rapid rise in inflation), and shifts in public opinion. The analysis also confirms that deliberation, in turn, can be influenced by the membership of the committee, the rules dictating the level of transparency and the clarity with regards to the objective of the policy and prospects of success.

By contrast, the analysis of deliberation by members of Congress is strictly about characterizing the process and content of deliberation and less about understanding policy outcomes, because there are no policy decisions to be made by the oversight committees. An interesting finding is that, contrary to general perception and the findings of previous studies, members of the Senate Banking Committee were no more knowledgeable or interested in the particulars of monetary policy than were members of the House Committee. Maybe the reason for this behavior is that members of congress see no point in spending time schooling themselves about a subject over which they have very little say. We should not dismiss the value of these hearings, however, because the banking committees make many decisions and the Fed Chairman has been known to testify about issues that go beyond the competencies of the Fed. Thus, the acceptance of the view that the Fed chairman is an expert on the economy acquired during the oversight hearings may influence no only the views that members of Congress have regarding monetary policy, as Schonhardt-Bailey finds, but also policy outcomes in other non-monetary-policy areas. One not so distant and critical example is the value given to the testimony given by Alan Greenspan during the hearings that resulted in the passage of a 2000 law that made it impossible for the Commodity Futures and Trading Commission to regulate the derivatives markets in the U.S.

Schonhardt-Bailey’s careful and impressive analysis of the Fed minutes and Congressional hearings provides invaluable insight into the role of deliberation in monetary policymaking and of the motivations of policy and political elites. Her work helps us understand the decision-making dynamics of organizations that have imperfect information about the impact of their decisions.