Rules Vs Discretion

The document discusses the debate over government intervention and its role in causing the financial crisis, particularly through the policies of the Federal Reserve under Alan Greenspan and Ben Bernanke. Economist John Taylor argues that low interest rates during 2001-2006 exacerbated the housing boom and financial instability, advocating for adherence to simple monetary policy rules like his own Taylor Rule. While Taylor's analysis critiques the lack of a consistent policy response during the crisis, it suggests the need for a balance between flexible discretion and rule-based approaches to monetary policy.