Rules versus Discretion in Financial and Other Regulation—Posner
There is an academic literatureon the choice between rules and discretion in regulation. Milton Friedman famously advocated that the Federal Reserve be required to increase the money supply by a fixed annual rate, rather than the Fed’s being allowed to exercise its traditional discretion over the money supply. But the choice between rules and discretion is not limited to the money supply, or indeed to financial regulation. It helps to distinguish not just between rules and discretion, but between rules, standards, and discretion. A posted speed limit is an example of a rule; liability for negligent operation of a vehicle...
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