Barry Lam’s book, Fewer Rules, Better People: The Case for Discretion, offers a thought-provoking examination of the tension between two foundational concepts prevalent in classical liberal and libertarian thought. Initially drawn to the book by my curiosity about these conflicting ideas, I found myself reflecting deeply on the balance between rules and discretion in decision-making.
At the heart of this discussion lies the notion of dispersed knowledge. Economists, particularly those influenced by F. A. Hayek, champion the advantages of decentralized decision-making, which allows for the full utilization of local insights and expertise. From this perspective, an increase in discretion could enhance the ability to leverage this dispersed knowledge, suggesting that libertarians should indeed embrace a more discretionary approach.
Conversely, within libertarian and classical liberal circles, there exists a robust argument favoring rules over discretion. A prime example is John Taylor’s book, First Principles: Five Keys to Restoring America’s Prosperity, which, as the (not-so-cheerful) economist John Cochran points out, pivots around the debate of rules versus discretion—whether our economy and society should operate under established guidelines or rely on the judgment of powerful individuals. The preference for rules is heralded as a key lesson from modern macroeconomics.
Initially, I anticipated that Lam’s arguments would bolster the case for discretion. However, as I engaged with his ideas, I recognized a muddled understanding on my part regarding the interplay between Hayekian discretion and Taylor’s rule-oriented approach. My takeaway is that the real question is not whether to favor rules or discretion but rather at what level each should be applied.
Lam’s advocacy for discretion specifically targets what he terms “street-level bureaucrats,” akin to Hayek’s notion of the “man on the spot.” I was persuaded by Lam’s argument that there exists a hierarchy favoring discretion at the ground level, with a gradual shift towards more rigid rules as one moves further from immediate decision-making contexts.
Two key reasons underpin this perspective. First, the need for stability and predictability increases with organizational hierarchy. Higher-level decision-makers must ensure their actions are consistent and comprehensible to allow subordinates to plan effectively. This was well illustrated by my co-blogger Jon Murphy in his insightful piece, “The Reason of Rules.” He highlights how President Trump’s erratic policy changes undermine the stability essential for millions relying on predictable governance. As Murphy aptly put it,
“To move out of the classroom and into economics, we are seeing exactly this now with Donald Trump’s arbitrary tariff ‘policy’ (‘policy’ is in quotes here because, since there is no consistency, it’s hard to call it policy by any reasonable sense of the word). Trump’s decrees on tariffs change day to day, sometimes even hour to hour. It’s quite impossible to predict what’s going to happen as there is no rhyme nor reason to these changes. Consequently, Americans and foreigners have no idea how to invest. As I write this, the stock market is down about 15% from the beginning of Trump’s second term, with all of the decline during this ‘will he-won’t he’ tariff nonsense.”
In a similar vein, John Taylor’s famous Taylor Rule serves as a guideline for monetary policy, while Scott Sumner advocates for rule-based approaches to target nominal GDP growth. At the microeconomic level, individual agents should enjoy considerable discretion in executing their activities. However, at the macroeconomic level, the case for policymakers and central bankers adhering to rules and refraining from discretionary maneuvers is compelling.
The second argument in favor of discretion at the street level is the limited scope of potential misfires. As I noted in a previous discussion on decentralized decision-making, “when centralized decisions are mistaken, the mistake is imposed across the entire system. Bottom-up decisions could also be faulty, but their impact is contained, allowing for correction through comparison and competition, something top-down decisions often lack.”
This distinction led me to believe that Lam mischaracterized one of his examples. He discusses former San Francisco DA Chesa Boudin, whose approach restricted discretion at the individual prosecutor level and centralized it within the bureaucracy. The consequences of a misjudged decision by a single prosecutor are far less damaging than those stemming from a district attorney’s choices affecting an entire jurisdiction.
While my critiques of Lam’s work stemmed primarily from the absence of a distinction between law and legislation—a rather niche point—it’s worth noting that his book is part of the A Norton Short series, which aims for brevity. This compactness inevitably limits the depth of exploration, yet it also spurred my own reflections on the arguments he presented.
In conclusion, I rate Lam’s book highly. However, it’s essential to remember that no review can replace the value of reading the book itself.
