All of the following are called rules. Which of the following so-called rules are actually like rules

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All of the following are called “rules.” Which of the following so-called rules are actually like “rules” and which are more like “discretion”? How can you tell the difference?
a. Congress passes a law providing automatic cost of living increases to Social Security every year.
b. Congress follows a rule to vote every few years on how much to increase Social Security payments—votes that usually occur just before an election. (This was the law before 1972.)
c. The Federal Reserve follows the famous “Taylor rule” for setting the Federal Funds rate:
Nominal rate = 2% + Inflation + 0.5X
× (Real growth – Potential growth rate)
d. The Federal Reserve follows a rule of “doing whatever seems right at the time.”
e. The police follow a rule of questioning anyone loitering outside of a bank who looks suspicious.
f. The police follow a rule of questioning anyone loitering outside of a bank who is dressed in bulky clothing that could conceal a weapon.
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Modern Principles of Economics

ISBN: 978-1429278393

3rd edition

Authors: Tyler Cowen, Alex Tabarrok

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