The Shadow Open Market Committee (SOMC) was founded in 1973 by Prof. Karl Brunner of the University of Rochester and Prof. Allan Meltzer of Carnegie-Mellon University. The SOMC is an independent organization whose members are drawn from academic institutions and private organizations. The original objective of the SOMC was to evaluate the policy choices and actions of the Federal Reserve’s Open Market Committee (FOMC).
Over the years the Committee has broadened its scope to cover a wide range of macroeconomic policy issues ranging from monetary and fiscal policy to issues pertaining to international trade and tax policy. The Committee’s deliberations are intended to improve policy discussions among policy makers, journalists and the general public with the hope that wiser policy decisions will result.
Since 1973, the SOMC has met on a regular basis to discuss economic policy. At each meeting a number of papers are prepared by Committee members on a variety of macroeconomic and public policy topics. Based on these papers and the Committee’s deliberations, a Policy Statement is prepared that summarizes the most important policy recommendations of the Committee. Each of these publications can be viewed in the interactive SOMC Archives. The views and opinions expressed by the Committee are its own and do not necessarily reflect the views of the organizations with which the members are affiliated or the sponsoring organizations.
In tandem with the Committee’s first meeting in 1973, Co-founder Prof. Allan Meltzer of Carnegie-Mellon University published the following paper outlining the original mission of the Committee’s formation. Read Prof. Allan Meltzer’s paper here.
“In August 1971, President Nixon yielded to political pressure for price and wage controls from large parts of the business community, the Congress, many economists, and parts of his own government. This was not entirely a surprise. Discussion of controls, guidelines, and other intervention had occurred sporadically at Treasury consultants’ meetings in 1970-71, and presumably at other meetings as well. Treasury Secretary Connolly was a known sympathizer and, at the Federal Reserve, Arthur Burns had been outspoken in favor of wage-price guidelines. As reported at the time, the inflation rate in the second quarter of 1971 was 4.4%, measured by the annual percentage rate of change of the consumer price index. At the time, 4% inflation was said to be politically unacceptable. With the election approaching, President Nixon chose price and wage controls as one major element of his revised economic strategy.
Karl Brunner and I decided to organize a group to criticize the decision and point out the error in the claim that controls could stop inflation. Our objective at the time and after was not just to complain about the results of policy actions. We wanted to show that better policy choices were available and that inflation could be controlled at acceptable cost, if the Federal Reserve controlled money growth. We hoped also to improve policy discussion.”