Could the Taylor Rule Have Prevented The Housing Bubble?

Mateusz Machaj, PhD in economics, is a founder of the Polish Ludwig von Mises Institute

[This is a transcript from the September 22, 2014 episode of the Tom Woods Show, featuring Mateusz Machaj, former Summer Fellow at the Mises Institute, and founder of the Mises Institute of Poland.]

Thomas Woods: The Taylor rule has been cited for so long by so many people who describe themselves as free-market economists that it has become more or less the conventional wisdom that the Taylor rule is a good guide for the central bank in formulating monetary policy. Let’s start off by explaining who Taylor is and what the Taylor rule says, in a way that’s understandable to the layman.

Mateusz Machaj: Well, John...