Yes for most cases. It's a clear way to indicate who's speaking without cluttering one paragraph. An exception can be made with very short dialogue. It's sort of analogous to separating narrative into paragraphs. Each paragraph contains its own idea. This makes it easier to read and to follow. Also, keeping things organized into paragraphs helps in the revision process.
Sometimes in older writings, when a number of characters are speaking as if from a crowd: From J Conrad's "The Nigger of the Narcissus" He just used one paragraph. But paper was probably much more expensive then. Here the crowd is treated as one entity, I think. But look at all the "m marks, dashes" though, and there weren't any keyboards then in Conrad's day, but he's still fun to read. Some one cried at him: "What's your name?"—"Donkin," he said, looking round with cheerful effrontery.—"What are you?" asked another voice.—"Why, a sailor like you, old man," he replied, in a tone that meant to be hearty but was impudent.—"Blamme if you don't look a blamed sight worse than a broken-down fireman," was the comment in a convinced mutter. Charley lifted his head and piped in a cheeky voice: "He is a man and a sailor"—then wiping his nose with the back of his hand bent down industriously over his bit of rope. A few laughed. Others stared doubtfully. The ragged newcomer was indignant—"That's a fine way to welcome a chap into a fo'c'sle," he snarled. "Are you men or a lot of 'artless canny-bals?"—"Don't take your shirt off for a word, shipmate," called out Belfast, jumping up in front, fiery, menacing, and friendly at the same time.—"Is that 'ere bloke blind?" asked the indomitable scarecrow, looking right and left with affected surprise. "Can't 'ee see I 'aven't got no shirt?" But this style is not used much anymore, I think. And starting a new paragraph for each new dialog can sure save on writing "tags" every time someone speaks in a conversation.
The general rule is to start a new paragraph every time the speaker changes. On occasion, you may embed a very short response (perhaps a word or two) from the other party in the same paragraph, but even that is discouraged.
...not really... regardless of length, if the dialog isn't connected to the narrative, or if it's a different person speaking, you must indent it, to set it apart from what came before and what follows...
I know you don't consider the Chicago Manual of Style's guidelines entirely applicable to fiction, but section 11.43 of the 15th edition explicitly states, "Paragraphing does not have to depend on a change of speaker," and provides an example in which more than one speaker's dialogue was contained in a single paragraph. However, I do agree wholeheartedly that it is far better to strictly separate speakers into separate paragraphs. I only include the exception for the sake of completeness. Personally, I would avoid it like ebola.
I try to write as many paragraphs as possible with more than one person speaking in order to confuse my readers, because if I confuse my readers, they will read the whole book. They are sure the read the next one in the series as well. But, yeah, I start a new paragraph. Why not? What benefit can be gained by putting two speakers in one paragraph unless the dialog is part of the narration? Then it might be better to paraphrase anyway.
the cms is mainly aimed at journalism, not literary writings, so while that could work ok in a news item, or magazine article, it wouldn't really work well in fiction...
I got a question regarding this. I just kinda want it clarified. I was looking over a story I had written a few months back and noticed I hadn't indented when someone new speaks. but I did this because the narrator was mostly recounting what the people had said. If anything it was more part of the narration then actual dialogue. If that makes any sense. I found it odd because I almost always tell people 'indent when a new person is speaking' I could provide a excerpt of what I am talking about.(though you will have to pardon the crappy writing)
better post an example... but if what you mean is 'paraphrasing' what was said, that wouldn't be in " " so wouldn't need to be indented... i can't think of an example where narrative might contain actual quoted dialog...
Why would you so adamantly avoid it? If it is done without causing confusion, then I see no reason for your great aversion to it. If I immediately continue this with not dialog, but narration, then it has served its purpose adequately. Is this one of those extremely rare moments when you would allow it, or not even then?
Do you mean aside from the fact that publoishers tend to frown on combining multiple speakers' quotes in the same paragraph? Because it is clearer if you separate the paragraphs. Also note that I had to shrug is a beat, not a tag (unless shrugging is much more vocal than I have ever observed), so a period is called for, not a comma, before the quote.
