Friday, January 07, 2011
Rules vs. Discretion: John Taylor Address
Today at the ASSA meetings John Taylor of Stanford spoke at a joint AEA/AFA luncheon(American Economic Assn/American Finance Assn). His topic: a short history and comparison of rules vs. discretion in both fiscal and monetary policy. He more or less argued that policy cycles between the two, and that the more discretion, the worse the effects for economic performance. He gave some simple arguments, both empirical and theoretical, for his contentions -- I found them useful. It was an interesting talk, although not as exciting as I'd expected. You can download his talk right here, and it's worth reading.
At the luncheon (some odd chicken dish, of course) I sat between two chaps from Africa, one of whom runs a think tank, the other a Ph.D. candidate in Japan, of all places. I think I learned more talking with them than I did from the luncheon address, mostly because there wasn't much new to me in Taylor's thesis, while I'd never even heard of Ghana's health insurance system before, nor several other of the things we talked about.
One thing during the luncheon really struck me. While we were discussing African development, the role of China came up. After a bit of discussion of what China has been doing (buying raw materials, for one thing), the fellow from the think tank said "if anyone wonders about whether China or the West is making more headway in Africa, the results are in: China won." He went on to explain why he thinks Africa can successfully develop, fairly quickly, without the West -- and it did make some sense.
A comment over lunch isn't exactly definitive research, but I jumped in my seat nonetheless.
Photo: economist John Taylor of Stanford University.