Back to the Ad Hoc Age

The title and the content of Gillian Tett’s short article “Goodbye Moderation, Hello to the Ad Hoc Age,” (FT, Nov 26, reprinted here) describe succinctly the remarkable swing in the pendulum from rules towards discretion in policy in recent years. In my view, this swing is a major reason for the end of the great moderation and the painfully protracted slump in the United States, as Tett describes in the article. She also expands on the idea by incorporating the government-caused debt mess and bailout operations in Europe.

Having been bombed back to the Ad Hoc Age we can only hope it is a lot shorter than the Stone Age, but the first step in ending it is understanding what happened, and this short article is very helpful in this regard.