What does the US Federal Reserve plan to do next? What new surprises are about to spring from eurozone governments? These are the questions worrying investors, amid the market turmoil in Ireland and elsewhere.

However, if John Taylor, the US economist, is to be believed, this outburst of anxiety is just one sign of a bigger structural shift that has potentially important implications for investors and economists alike.

The issue at stake, according to a paper presented to a Columbia University conference last weekend*, revolves around the use of “rules” versus “discretion.” In the first few decades after the second world war, Taylor argues, western economic policymaking was based on ad hoc discretion: central banks generally operated with minimal transparency. Decisions about interest rates, for example, were hidden in decisions about reserves. And governments used fiscal policy in a counter-cyclical, discretionary manner.