After Greenspan: The Taylor Rule?
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A Fed Chairman applying Taylor rules would be harder to bash, since he'd just be following the formula. But that would also limit the good he could do. Taylor rules, many economists say, don't work because they are reactive. They don't move rates until inflation picks up. It's like not hitting your brakes until you touch the other guy's bumper. Greenspan's rate cut in August 1998 probably saved the world from financial meltdown. Taylor's rules would have precluded the move. It's seductive to think we could build a Greenspan box, a computer to out-Alan Alan. But monetary policy can't be made in a vacuum. And as much as Taylor's acolytes might hope, it can't be made in a box either.
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