This article exhibits some caution in deploying the polarity between ‘rules’ and ‘discretion’ in an historical context before first establishing the context in which these terms originated and have been used. It takes Nigel Lawson, a British Treasury minister in the 1980s, as one example of a policymaker who consciously favoured rules over discretion, and likewise takes the economist H.C. Simons as an academic economist who did likewise in the 1930s. In establishing how Keynes saw this issue, the centrality of the gold standard as the prime example of a rules-based system becomes apparent. The evolution of Keynes’s own views here is the main theme. As a young economist he accepted the authority of the gold standard as an impartial arbiter, governed by ‘the rules of the game’. But he came to see that its ostensible lack of bias was compromised in practice by the interests of creditor countries and their power to enforce their own priorities upon debtors. In this sense, it was the replacement of Britain as the international hegemon by the United States after the First World War that opened Keynes’s eyes to the defects of a rules-based system that, to modern eyes, has parallels with the workings of the euro today.
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Clarke, P. (2017), “Keynes and the Manchester Guardian’s Reconstruction Supplements”, Annals of the Fondazione Luigi Einaudi, 51(2): 9-23
