Cognition, Complexity, and the Financial Crisis - The Federal Open Market Committee's Search for a Monetary Policy Strategy

Research output: ThesisDoctoral ThesisCollection of Articles


Complexity theory characterizes organizations as systems of interdependent activities where choices to any one activity have hard-to-predict consequences elsewhere. Optimizing behavior under conditions of complexity is therefore difficult, if not impossible. Decision making, instead, unfolds as a boundedly rational search process over time. This dissertation begins with the premise that complexity matters, and that interdependencies are an inherent part of organizational decision making. However, we have only limited knowledge about how flesh and blood decision makers, facing real-world problems, deal with complexity. This is what the dissertation seeks to find out. It asks how decision makers take interdependencies into account, and how they could do better, increasing the quality of decision making. Empirical analysis was conducted in three essays, each investigating decision making at the Federal Reserve, the central bank of the Unite States. Qualitative methods were used on the meeting transcripts of the bank's monetary policy committee, the Federal Open Market Committee. Transcripts were primarily analyzed from three meetings: December 2008, January 2009, and March 2009. Essay 1 develops a typology of search strategies employed by decision makers. According to this typology, individual-level differences matter to how complexity is approached and to how much complexity is attended. The essay finds that focusing on key choices and interdependencies first can provide a foundation to expand search as decision makers learn to handle the situation. Essay 1 also theorizes about the importance of cognitive frames to the search process. Essay 2 picks up on the importance of cognitive frames, and sets out to explore their role in complex decision making in detail. The essay finds that while individuals perceive the world through different frames, each of which guides their attention toward different facets of the complex environment, they need not be constrained by any single frame. Interdependencies are best perceived by decision makers adept at switching between frames. Such generalists are an important part of a decision making group working under conditions of complexity. Essay 3 focuses on the search efforts of the most complex decision makers only. The essay reveals a search process that begins with the weighing of broad classes of solutions. The content of these solution classes is shared amongst decision makers who, however, disagree on how best to frame the problem. As search proceeds, decision makers begin to look for more detailed solutions. The number of alternatives increases, and decision makers' favored solutions diverge. At the same time, sharing their views amongst each other, convergence occurs in the way that they apply frames to the problem. Finally, search reaches the stage where a detailed decision is made, and both solutions and frames have converged to a stable equilibrium.
Translated title of the contributionKognitio, kompleksinen päätöksenteko, ja finanssikriisi: avomarkkinakomitea FOMC rahapoliittista strategiaa etsimässä
Original languageEnglish
QualificationDoctor's degree
Awarding Institution
  • Aalto University
  • Schildt, Henri, Supervising Professor
Print ISBNs978-952-64-0657-2
Electronic ISBNs978-952-64-0658-9
Publication statusPublished - 2022
MoE publication typeG5 Doctoral dissertation (article)


  • cognition
  • cognitive frame
  • complexity
  • decision making
  • Federal Reserve
  • FOMC
  • interdependency
  • monetary policy
  • strategy


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