over the past 130 years or so. the credit cycle is every bit as regular as the business cycle. but it differs from the business cycle in two critical respects : its amplitude is at least twice as large and its duration at least twice as long. both are important for the design of macro - prudential policy regimes. the larger amplitude of the credit cycle is one reason why credit booms have, more often than not historically, resulted in banking crises ( table 1 ). because financial crises cause large and long - lived disruption to the economy, this suggests a strong empirical link between credit cycles and macroeconomic destabilisation. or, put differently, curbing the credit cycle appears to be an important ingredient of broadly - based macro - economic stability. in principle, monetary policy could be used to curb the credit cycle. in practice, the differing duration and synchronicity of the credit and business cycles means this is unlikely to work well. pre - crisis experience illustrates well just that point. at the same time as the wider economy was operating in cruise control, credit markets were in overdrive. hitting these two birds – one flying high, the other low – with one ( monetary policy ) stone would have defied even the most astute marksman [ king, 2013 ]. what is needed, in these instances, is a second instrument. in the language of tinbergen [ tinbergen, 1952 ], two cycles and two objectives call for two instruments. this is where macro - prudential policy comes in. one of the aims of macro - prudential policy is to act counter - cyclically on the credit cycle, constraining credit booms and cushioning busts bis central bankers ’ speeches [ aikman et al, 2014 ]. in this role, macro - prudential policy is complementing monetary policy in its role of stabilising the macro - economy. macro - economic policy then becomes, in effect, two - handed or ambidextrous. since the crisis, this two - handed approach to policy has been taken up actively by a number of countries internationally [ imf, 2013 ]. for example, counter - cyclical prudential policy is now baked into new international regulatory rules. the so - called basel iii reforms introduced for the first time a “ counter - cyclical capital buffer ” ( ccb ) to be adjusted to counteract the credit cycle [ bcbs, 2010 ]. while a small step for

output and inflation generated in the previous period. in the committee stages, the majority - or more precisely the median - vote was implemented once all committee members had entered a vote into their respective computers. participants were told nothing at the start of the experiment about the structure of the economic model with which they were playing, or the disturbances that it was subject to, other than that a structural change occurred at some point during each play of the game. in short, they were operating - much like real - life monetary policy makers - in uncertain conditions, doing their best to identify the shocks that hit the economy and offsetting their impact by adjusting the short - term interest rate. to quantify their performance, players were scored according to their ability to keep inflation close to a pre - specified target and to minimise output fluctuations, and were paid a modest amount for doing so. chart 1 shows the pattern of average scores over the different stages of the game. three features are striking : ( i ) the significant upward trend in the results. players clearly learned how to play the game as time went on. ( ii ) the large upward movement in scores when players moved to committee decision - making. ( iii ) the large downward move in scores when participants returned to playing as individuals. these results support the idea that committee decisions represent a significant improvement over those of the individuals that comprise them. what might account for these results? the blinder and morgan and bank studies suggest two main reasons. first, collective decision - making appears to give more weight to the better and less weight to the worse committee members, as judged by their scores when playing the game as individuals, than would be implied by taking the mean of individual performance. the best player had some influence on the decisions of the group of which they were a member. and the impact of the worst player was offset by majority voting. in other words, the median score of the players in the individual rounds was significantly above the mean, implying that the average was being pulled down by a minority of relatively bad players. second, there was also evidence from the experiments consistent with the hypothesis that committees enable all members to improve their performance by sharing information and learning from each other. and it was striking that the performance of committees was on average somewhat better than that of the performance of the single best player on the committee when playing alone. so in terms of group decisions, it appears that the whole is different from - and generally better than - the sum of its parts. producing the