Hayek Lecture by Taylor

John Taylor received the Manhattan Institute’s 2012 Hayek prize for his book, First Principles: Five Keys to Restoring America’s Prosperity In the lecture he gave for the occasion, Professor Taylor argued for rules-based policies—-that would be a real reform. The video of the lecture is on the Manhattan Institute site.   It was also published in the WSJ

One thought on “Hayek Lecture by Taylor

  1. The piece is pretty good in discussing the problem until it gets to the end and asks, what can be done about it?

    The argument as I understand it is as follows: Central banks act with ‘discretion’ and not by rules; central banks have too much discretion (in a different sense) to either act with discretion (in the first sense) or follow a self-imposed rule; the system selects inflation-biased central bankers; and we should appoint a conservative central banker.

    These propositions are all very prominent in the academic literature. Kydland and Prescott, on the first; Friedman, on the second; I’m not sure about the third, actually; and Rogoff on the last.

    The first three are basically right; but the last — the divine intervention to select a good central banker — is unfortunately mistaken. Taylor is just turning the focus of the question to the lawmakers who make the appointment rules, as Bennett McCallum pointed out. What’s needed are monetary institutions that are robust enough to withstand political opportunism. Free banking is one important possibility.

    Of course I’m not saying anything that’s new to the reader of this blog but it may be worth pointing it out anyway.

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