the predictability of policies so people know what the game is, what's going to happen with tax policy, monetary policy, interest rates, and also the rule of law. economickists didn't emphasize how important the rule of law is until recently. those are the hardest two things to teach students. market is reasonably easy, scope of government goes back many years but those two because they're not emphasized enough. >> host: those two principles that we have been discussing, the last couple of years in washington, trying to get the budget right, trying to get policy right...
risk and have capital that they will be enforced by the regulators to leave it have a special favors it is not just government run well but the concern we are dependent on government. >>host: what went wrong in 2008? >> the leading up to it the two main things the federal reserve decided to hold interest rates very low that caused people to search for yield to get hired just raise san to god risk and also caused a boom in the housing market that turned into the bust people saw that extra risk that led to the crisis ultimately to the panic of 2008. >>host: what about the tax
cuts of the first bush 43 administration of the first term? we often hear that president clinton left the bush with the answer plus a and he lost it. >> he certainly did leave president bush and the economy with a surplus. a big reason for that is tea brought spending ralph during the '90s as a share of gdp spending fell by four-point 1% of gdp during the 1990's. that enabled us to have a surplus and in the '90s federal spending has risen and reversed completely as sheriff gdp it caught cahow as high as 25% up from
18-point to in in 2000 so one thing that has gone wrong is we have ratcheted up spending as a share of gdp more than they should be. >>host: should this tax cuts have taken place? but they think a permanent tax cuts were good and helped with the economy but i quarrel with the temporary tax cuts with the stimulus to get the economy going but everything i see is reducing the top tax rates, the lowest tax rates of we try to reduce the taxes of those people across the board i think it was healthy but the real problem is we did not control spending it has gotten worse. >>host: john taylor writes about that time serving as undersecretary in his book "first principles" five keys to restoring america's prosperity" secretary taylor
you write about the nixon shock what is that. >>guest: 1973 he imposed wage jim price controls on the entire economy the reverse of the market approach and i think that was a shock did was not expected and a factor that lasted throughout the '70s land which to other problems paid monetary policy too easy and it made the money frozen that ultimately because you cannot have those trevor lead to higher inflation it is in example of a deviation but i emphasize so much it in that case first of all, it was completely unpredictable but it really went away from the for of markets being able
people and we lost that. >>host: when you write about capitalism in it "first principles" what you writing about? >>guest: the financial sector think it is broader than that one example is the case for the banks had a lot of regulators and supervisors many on the premise of the wall street banks somehow did not see the actions taken why that happened to, we don't know another reserve is regulatory capture that they can persuade one way or the other and it should be a concerted is one of those things we have laws that if not for stackhouse there is
of special favors going on and it is not only unfair but makes people question how our economy works it is not good for the economy. >>host: an award for which your? >>guest: it was awarded last year, a prize that celebrates their ridings of hayek like the "road to serfdom" and many others say and those who decide on the prize spot what i was saying here was consistent with that in aid to refer to hayek especially with rule of law and predictability and he emphasized the rule of law as a way to freezer of aliens to maintain individual freedom for people so that it protects people's freedom.
for be predictability per tax economics to make the economy look better bahia sized it as another reason to help guarantee with personal liberty and freedom >>host: if milton friedman would read it what would he think of "first principles"? >>guest: i hope he would like it he was a good friend but i am a descent to think what he would have said. such an influential person i hope he likes it. >>host: what you do hear a stamford? >>guest: i'd graduate -- teach graduate students, freshman the principles of economics and have them coming in in the beginning and at the end. i also do research at the hoover institution diana
senior fellow and that is a little more of the policy work that i do that is focused like on monetary policy how it could be different for the budget could be different rather than pure academic research. >>host: your the senior fellow here that but with secretary shultz and he said he resigned as secretary of the treasury because the president nixon's wage and price controls. >>guest: yes. george shultz had for a cabinet post and each one he surt admirably in my view and it was hard as treasury secretary. one story he may not have told you is how paul volcker worked for him at the treasury and they did some important reforms of the international monetary system and years later when paul volcker became the
chairman of the reserve he used some of those same ideas to make monetary policy much better so in a way shultz's influence extended to periods that you don't think about. >>host: role as your biggest frustration as undersecretary of the treasury? >> in washington and was expecting a different job that was different because 9/11 ochered right after i got there so rather than going to the fancy halls of negotiation of finance i went to baghdad and africa to think about much more difficult problems. they had to put it the new currency of the the the new monetary system in place in iraq. one of the most difficult things i had to do it was frustrating but it was
amazing and rewarding and the series worked and we could get the financial system up and running with a lot of cooperation from the iraqis and a combination of frustration but to be the frustration of policy in general is that we had gotten off track it is the most tragic that we had as america had a good set of policies in place for nearly a quarter of this century and we're not there now. it is very frustrating to see the slow recovery and from the other countries. >>host: you also write about apollo deal. how did he do? >> he was not there too long and left pretty early there was some disagreements with the of ministrations and on policy i think that was one
of them but he gave me the opportunity to make reforms of the international monetary system working with the imf and the of policy with the emerging market countries that i do think did improve things we did have a valid problem with the emerging markets in the late 90's the of the early 2000's and with reforms of the imf it stopped fortunately whether due to brazil or turkey india performed much better so they went to these first principles much better than we did in your doing quite well. >>host: with the phrase too big to fail what do you think? >> would give me in this is
of the largely financial institutions are viewed as too big to fail without causing damage. it really hasn't got a way. and the the initial crisis has been made worse because they saw the bailout now they say they are bigger it hasn't disappeared so a lot of the work it is written that did this book how you can reform the bankruptcy code so even a large financial institution k going to baker see just like united airlines and people kept flying we would like them to do the same thing but they don't get a special deal and that would be a much healthier system. reworking of that i think there are some promising opportunities we do have the bankruptcy law that means no
special favors because we have to work of that plan -- and raised questions about too big to fail. >>host: what is this chart we're looking act on "first principles"? rate in the united states going back to the 1940's and it traces out how unemployment will increase with reid deviate from the principles you can see the steady increase that we get back to the principles and unemployed it comes down then we get off the and it is back up again. it is not proof but it is a correlation and striking look at the underpinnings to cd interventions and the lack of interventions it is a story that does suggest strong causality. >>host: this is booktv on
c-span2 on the campus of stanford university speaking with secretary john taylor "first principles" five keys to restoring america's prosperity" winner of the high-tech prizes as well here is the cover of the book. you are watching booktv. >>host: you are watching booktv on c-span2 our location at stanford university at the hoover institution in talking with
professors and scholars about there work in and joining us now is a peter berkowitz. author of "constitional conservatism" liberty, self-government, and political moderation" here is the cover of the books in what is on this cover? >> it is a depiction of the union and liberty in the federal capital building about 1869. >>host: who was edmund burke? at. >>guest: he was one of the greatest british statesman born 1729 and a member of the whig party. most known for her supplement called the reflections of the
revolutions of france and published 1790 and in three attacks on the french revolution and he denounces them because he regards it which of course, is undertaken in the name of liberty he regards it as a great threat to freedom so this reflects interestingly and also becomes a classic statement or founding statement of the modern conservative countries. >>host: who is wrestle kirk? >> and important american that published the book in 1953 called the conservative mind this was part of a renaissance of conservative thinking in the united states after world war ii in the wake of world war two's there were two huge strides
that jolted a conservatism into being in the united states won was the rise of soviet communism and kirchner presents the social conservative austrian with his books the conservative mind ranges across the whole of america not just america but the modern era and agree to britain to show how active and influential it has been making in the modern mind. >>host: one other piece the federalist you describe it as the masterpiece of the american political thought why you call it that?
>>guest: actually originally is 85 newspaper articles the brainchild of alexander hamilton shortly after the convention was completed with a proposal for a new constitution hamilton said this is been sent to the states for ratification it will be a close battle and he listed james madison to write a series of newspaper articles with a practical intention of persuading new york to ratify this new constitution and so they had up practical aim each one appeared in the new york newspaper but at the same time he emoted in madison thought part of persuading citizens to
ratify the constitution evolves helping them understand the body put into practice with universal practice is so self governance so hamilton and provide us with a remarkable as i said the account what those principles are identified this particular translation bears our allegiance. >>host: we have this related stool with the federalist in. how does the current conservative movement wealth when you look at the three legged stool? >> it looks like this. here you can see a bit of burkett here you see