Monday, August 20, 2012

Economists Should Love Paul Ryan’s Support of Policy Rules—but are they the Right Rules?

Economists love the idea of rules for monetary and fiscal policy. Many politicians hate them, preferring the discretion to do whatever seems like a good idea at the time. For that reason, if no other, economists should love Paul Ryan, an atypical politician who supports policy rules. But there is a catch—are the rules that Ryan backs the right ones?

Why We Like Policy Rules

Economists prefer rules to unlimited political discretion because they improve the chance that policy will be appropriate and timely.
Some of the reasons are technical. Lags in data collection and decision making make it hard to take monetary or fiscal policy actions until well after a problem begins to develop.>>>Read more

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