A Fast and Fun Way to Learn about Rules Versus Discretion

The Hoover Institution has initiated a fascinating Perspectives on Policy video series in which experienced experts give clear explanations of key policy issues assisted by the latest in animation technology. This is not the typical video of talking heads as you might expect.  In this imaginative series tabletop cartoon figures join the experts, move around the screen, bend and twist to show emotions, and even wave at each other from time to time. Topics range from economics, including government entitlement reform and innovative market-based environmental policies, to politics, including health care and immigration.

This week Perspectives on Policy launched a whole new 5-minute video on monetary policy and the Federal Reserve.

I do most of the talking in this video, but I am joined by puppet size caricatures of policy makers such as Paul Volcker and Alan Greenspan as shown in this screen shot.

There is also a clever machine on the video with a gauge and a lever to raise and lower the federal funds interest rate, though the connection with the money supply is not forgotten. Note that monetary policy is not on automatic pilot in that people have to operate the machine.

I naturally refer to the Taylor rule to show why basic reasoning and data support rules over discretion and the importance of rules-based monetary policy.

The animation also shows the money supply, the interest rate, the inflation rate, the housing boom and bust, and even Federal Open Market Committee of monetary policy makers.

I loved working the talented Hoover production team on this video, and the reaction thus far is very positive and encouraging.

Who says monetary policy is arcane and technical? It’s fun, and, besides the video, there are key facts, quizzes, etc. that can be found at the link.


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