John Taylor’s First Principles argues for (p.18):
- predictable policy framework
- rule of law
- strong incentives
- reliance on markets
- clearly limited role for government
On p. 25, he points out that a policy can follow one principle but violate others. An example he gives is
Prohibition was made a rule of law…but its restrictions on buying and selling alcohol, unpredictable enforcement, and intrusion of government proved to be a disaster
At this point, you might expect him to discuss the drug war, but instead he discreetly changes the subject.
One is tempted to view First Principles as an election-year book, designed to enhance (or at least not detract from) the author’s chances of landing a top position in a Republican Administration. For me, it succeeds on that level. I would feel comfortable if Taylor were, say, Treasury Secretary or Fed Chairman. On the other hand, the book is not designed to delve into difficult nuances or to persuade someone with a different point of view.
The model of U.S. economic performance embedded in the book can be summed up as:
1. Economists are trained in different schools, with some becoming rule-oriented and others taught to be interventionist.
2. During some eras, rule-oriented economists are given positions of power. In other eras, discretion-oriented economists are given positions of power. This is only somewhat correlated with electoral politics. Some Republican Administrations have been interventionist, and occasionally a Democratic Administration is rule-oriented.
3. When the rule-oriented economists hold sway, economic performance becomes good. When discretion-oriented economists hold sway, economic performance deteriorates.
This model is fit to the last forty years of history in a somewhat post hoc way. For example, Alan Greenspan is sometimes a discretionist (when he supports a tax rebate in 1975 and when he loosens the money supply in 2003-2006) but otherwise is rule-oriented. (In my view, Greenspan by temperament was always a discretionist. He thought too highly of his own intellectual powers to be anything else.)
The amount of independent causal effect that this model attributes to economic advisers is the highest that I have ever seen suggested. I find more credible the remark I have seen attributed to Douglas Holtz-Eakin that economists are lucky to bat .100 in policy contests.
Again, I want to emphasize that I admire John Taylor’s more serious work. His paper with John Cogan is by far the best explanation for the failure of the 2009 stimulus program. Compared with the analysis in that paper, the media focus on the “Larry Summers memo” is sophomoric and delusional.
Overall, I can easily recommend John Taylor and his principles to the eventual Republican Presidential nominee. But coming up with a reason to recommend this book is harder.