John Taylor - March 2011
"Rules versus Discretion in Monetary Policy Making"
John B. Taylor received his PhD from the Stanford University and is the George P. Shultz Senior Fellow in Economics at the Hoover Institution and the Mary and Robert Raymond Professor of Economics at Stanford University. Before joining the Stanford faculty in 1984, Taylor held positions as professor of economics at Princeton University and Columbia University.
Taylor's fields of expertise are monetary policy, fiscal policy, and international economics. He has an active interest in public policy. Taylor has previously served as senior economist on President Ford's Council of Economic Advisers, as a member of President Bush's Council of Economic Advisers, as economic adviser to the Bob Dole presidential campaign, and as economic adviser to the George W. Bush presidential campaign. He was also a member of the Congressional Budget Office's Panel of Economic Advisers from 1995 to 2001.
From 2001 to 2005, Taylor served as Undersecretary of Treasury for International Affairs where he was responsible for U.S. policies in international finance, which includes currency markets, trade in financial services, foreign investment, international debt and development, and oversight of the International Monetary Fund and the World Bank. He was also responsible for coordinating financial policy with the G-7 countries, was chair of the working party on international macroeconomics at the OECD, and was a member of the Board of the Overseas Private Investment Corporation.
Taylor has won numerous awards for his contributions to economics. He was awarded the Adam Smith Award from the National Association for Business Economics for his work as a groundbreaking researcher, public servant, and teacher, the Alexander Hamilton Award for his overall leadership in international finance at the U.S. Treasury, the Treasury Distinguished Service Award for designing and implementing the currency reforms in Iraq, the Medal of the Republic of Uruguay for his work in resolving the 2002 financial crisis, and the George P. Shultz Distinguished Public Service Award.
The debate between rules and discretion focuses on whether policy makers can be trusted with the responsibility to make substantial budgetary and monetary changes in response to economic crises. This debate has heightened recently as unprecedented discretionary fiscal and monetary policies have been pursued, including the massive fiscal stimulus bill of 2009 and the Fed's quantitative easing. In his lecture, Professor Taylor argued that adherence to a standard monetary policy rule--the Taylor rule--in the first half of the previous decade would have possibly kept the financial crisis from happening. Under this rule, policy makers would be afforded only a strict, transparent set of responses to a changing economy. Taylor also argued that the fiscal stimulus was impotent mainly because states used the federal funding to make up for budget shortfalls. Around 400 students and faculty attended the standing-room-only lecture.