Foreseeing Unforeseeable Futures: Uncertainty in FOMC Response to Recession, 1980 – 2001

• In Event: 256 - Section on Organizations, Occupations and Work Roundtables (one-hour)
  In Refereed Roundtable: Table 22. Institutional Theory II

Abstract

Organizations’ external environments are often uncertain. In successful organizations, decision-makers are able to make sense of—and then respond to—these uncertainties. Past scholarship has used the Federal Open Market Committee (FOMC) to explore sensemaking and decision-making in uncertain environments. But what exactly are the uncertainties that FOMC members respond to? Within the perceived environmental uncertainty (PEU) literature, much attention has been paid to defining uncertainty and uncovering its composite dimensions. According to one important measure, proposed by Milliken (1987), uncertainty has three dimensions—state, effect, and response. However, when applied to FOMC response to recession, this measure (and, in fact, much of the literature) falls short in describing the uncertainty observed during committee meetings. This suggests that the dimensions present within the PEU literature are insufficient. To address this I provide a historical-comparative analysis of the Federal Open Market Committee (FOMC) response to recession, 1980 – 2001. I find support for a reconceptualization of Milliken’s three dimensions of uncertainty as stages instead of states. I also find evidence for a new dimension—“cause” uncertainty—not previously described in the contemporary literature. In doing so I recognize the role of interaction and place response to uncertainty in its institutional context.

Author

• Peter Lista, Indiana University