John Taylor on Rules, Discretion, and First Principles

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🗓️ 30 April 2012

⏱️ 63 minutes

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Summary

John Taylor of Stanford University's Hoover Institution talks with EconTalk host Russ Roberts about his new book, First Principles: Five Keys to Restoring America's Prosperity. Taylor argues that when economic policy adhere to the right basic principles such as keeping rules rather than using discretion, then the economy thrives. Ignoring these principles, Taylor argues, leads to bad economic outcomes such as recessions, inflation, or high unemployment. Taylor illustrates these ideas with a whirlwind tour of the last half century of American economic policy and history. The focus is on monetary and fiscal policy but Taylor also discusses health care reform and other policy areas. The conversation closes with a look at the likelihood that economic policy will change dramatically after 2012.

Transcript

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0:00.0	Welcome to Econ Talk, part of the Library of Economics and Liberty. I'm your host Russ Roberts
0:13.9	of George Mason University and Stanford University's Hoover Institution. Our website is econtalk.org
0:21.2	where you can subscribe, find other episodes, comment on this podcast, and find links to
0:26.5	another information related to today's conversation. Our email address is mail at econtalk.org. We'd
0:33.6	love to hear from you.
0:38.9	Today's April 17th, 2012, and my guest is John Taylor of the Hoover Institution and Stanford
0:45.1	University. His latest book is First Principles, Five Keys to Restoring America's Prosperity.
0:50.9	John, welcome back to Econ Talk.
0:53.0	Great to be back, Russ. Thank you.
0:55.2	Our topic today is the ideas in your new book, First Principles. Let's start with the five keys
1:02.1	that you identify as being important for prosperity.
1:06.0	They all center around the idea of economic freedom, which is my definition of
1:13.2	situation where people can buy what they want, sell what they want, work where they want,
1:17.9	help people in the way they think is best. But that's within a framework that includes these
1:25.0	five keys. One is that the policy be predictable. The decisions are made within a predictable policy
1:32.2	framework. Second is that there's an emphasis on the rule of law, so you know what the law is
1:37.5	actually stating. Third is that the emphasis is on markets, and from an economist's perspective,
1:46.3	markets are a wonderful way to get decisions made in an efficient way. They also provide the
1:54.3	fourth idea, which is incentives. Incentives should be the focus of any economic freedom framework.
2:01.7	And then finally, the fifth is a limited role for government to specify a role for government,
2:08.4	which delineates what government should do and what markets should do.
2:12.8	Your book traces the history of various periods of relative intervention and relative freedom,
	...

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