FEDERAL-RESERVE POLICY DECISION-MAKING - POLITICAL AND BUREAUCRATIC INFLUENCES

While a significant body of literature in the field of bureaucratic politics has developed recently focusing on the principal-agent relationship and its effect on policy outputs, there has been very little research exploring the foundations of decision making in multiagent bureaucracies. This paper sets forth a general theoretical framework for analyzing the nature of consensual decision making in multiagent bureaucratic agencies while allowing for agents with different contractual principals. This paper explores the consensual nature of decision making for these bodies by examining the patterns of dissent in the Federal Reserve System's Federal Open Market Committee (FOMC) from January 1967 to December 1990. The findings of this study reveal that internal authorities (e.g., Fed chairs) have a greater impact than external authorities (e.g., presidential administrations) because of the high levels of institutional expertise, leadership, cohesion, loyalty, and the socialization process that exists within the bureaucratic agency. Also, in the case of external authorities, these results strongly suggest that contractual principals have a greater impact on consensual decision making than noncontractual principals.