Is a little uncertainty sometimes a good thing?

I was reading today that Ben Bernake, the nominee for Chairman of the Federal Reserve, will be speaking at MIT's commencement this year. Mr. Bernake has a strong reputation for intelligence and for challenging conventional wisdom. In describing his economic philosophy, they quote him saying, "You want to release information that helps the market and the public achieve more accurate expectations of future policy and the future state of the economy."

If we're going to challenge conventional wisdom, how about we look at the idea that more information is better? Does maintaining a transparent monetary policy really help? In most policymaking cases, knowing more information is better because you can better discern the potential outcomes of the policy and, more importantly, judge the hidden agendas of stakeholders.

However, during his tenure as Fed Chair, Alan Greenspan was notorious for opacity. His speeches and congressional testimony were analyzed like Kremlinologists used to analyze the Soviet Union. While Mr. Greenspan kept people guessing, Mr. Bernake instead believes that clearer statements will allow people to make better predictions and have more confidence in the future.

But what happens when people get too confident in their predictions for the future? After all, a good prediction is still a prediction, and thus prone to be wrong on occasion. If people have too much confidence in their prediction, they can put themselves at risk of drastic loss if those predictions fail. Perhaps a little opacity keeps people on their toes and makes sure that they hedge their bets just to be safe?