“You should not think in terms of controlling the economy,” Dr. Prescott said. “That leads to bad outcomes. You should think in terms of committing to good policy rules.”"

See Nobel-Winning Economist Edward C. Prescott Dies at 81: Researcher found new explanations for booms and busts and advised policy makers to stick to a plan by James R. Hagerty of The WSJ. Excerpts:

"With Dr. Kydland, he published an influential 1977 paper called “Rules Rather Than Discretion: The Inconsistency of Optimal Plans,” concluding that policy makers could err by straying from long-term goals to address short-run problems. For instance, central bankers might be tempted to ease up on their commitments to contain inflation in the short run as a way to boost employment. If so, the professors argued, people might start assuming that prices were out of control, creating a psychology that led to faster inflation for long periods.

Sticking to a sound policy was far more effective than jolting the economy with frequent adjustments, they argued. “You should not think in terms of controlling the economy,” Dr. Prescott said. “That leads to bad outcomes. You should think in terms of committing to good policy rules.”"

"In a 1982 paper, the two economists challenged the idea, associated with John Maynard Keynes, that economic slumps were caused by inadequate demand for goods and services and should be cured by such means as higher government spending and lower interest rates. Dr. Prescott and Dr. Kydland instead stressed the role of productivity and argued that supply-side shocks, such as a technological innovation or a surge in energy prices, could explain the ups and downs of economies."

"He argued that nations’ economies often were held back by tax policies that discouraged work or efforts to protect established companies from newcomers with better technology."