John B. Taylor is one of the greatest economic minds of the 20th and 21st centuries. His work in macroeconomics and monetary policy helped create one of the most important Macroeconomic tools today, The Taylor Rule, which is used as an interest rate forecasting tool. He served as an economic advisor to President’s Ford, Carter, George H. W. Bush, and George W. Bush. Currently, Taylor is a professor of economics at Stanford University and has won numerous awards in the field of economics, including the 2016 Adam Smith Award and 2015 Truman Medal for economic policy.
The Taylor Rule, as coined following his 1993 research paper, proposed that manipulation of short-term interest rates by the central bank could serve as a counter and pro cyclical force on the economy. He proposed to raise rates when growth and inflation was excessive and cut rates if they fell below targets. His simple interest rate equation is now largely used as an effective formula for interest rate levels.
Besides his work on monetary policy and what the central bank should attempt to manipulate, Taylor has also done extensive research on the financial crisis of 2008. In particular, Taylor focuses on the actions of the Federal reserve, noting how interest rates were kept too low for too long, allowing for an excessive amount of output growth and inflation to occur. He proposed that the economic crisis was a direct result of government inactions, actions, and interventions, rather than a failure by the private economy.
Following the crisis, Taylor has stressed the importance of a stable monetary policy, rather than the quantitative pro and counter cyclical measures that the Fed had been using. Balance in the economy is of the utmost importance to Taylor, and his work reflects that.
Ampleforth’s protocols and automatic expansions as well as contractions serve to create the stability in the Ampleforth network that John B. Taylor believes should be present in the US economy. Fiat counter cyclical pressures are driven by those in charge of the Fed and can be influenced by any number of factors. The countercyclical pressures present in Ampleforth are market drive, rules-based, and non-dilutive for anyone holding the token, creating a static, stable policy. There is not an easing due to external pressures, rather, the policy to absorb shocks in the Ampleforth Network is constant, just as Taylor wants of US economic policy.
To understand more about creating a stable system that is less prone to biases and human driven overcorrection and error, read our chapter on Rules vs. Discretion.