"If you take hyphens seriously, you will surely go mad."
--John Benbow, Manuscript and Proof (1937)
John Benbow was the author of the Oxford University Press stylebook. I've been quoting him for years in the grammar classes I taught at the New School, and I hope his works have been able to save at least a few young writers and editors from the madness of hyphens. He's getting quoted more and more frequently now, too. Thank goodness!
However, although we don't need to take hyphens seriously, we need to take them, both in and out of our writing. Em dashes, en dashes, and hyphens all hover, horizontally serene, above the baseline in printed matter. In that floating world, hyphens are the marks that drift most easily from the clear atmosphere of punctuation into the foggy miasma that is house style.
That is, the rightness or wrongness of hyphens can be more than somewhat relative. What one editor will insert, another might delete. What one copy chief commands, another might abjure. Keeping that in mind, however, following a few generally accepted rules will keep us within bounds.
Commit these to memory. Stay safe. Stay sane.
RULE NUMBER ONE: Always check the dictionary of choice first to determine if a two-word compound is one word, a hyphenated compound, or two words.
RULE NUMBER TWO: If the compound is not in the dictionary, follow your house style, whether it be Chicago, Words into Type, AP, etc.
RULE NUMBER THREE: Follow the simple rules below in all other cases and you will most probably not be wrong.
1) Never hyphenate compounds formed with -ly modifiers (wholly owned)
2) DO use hyphens when comparative and superlative adjectives are used with a modifier BEFORE the noun (highest-paid, best-qualified applicant)
3) DO use hyphens in modifiers formed of a past or present participle and another word BEFORE the noun (a law-abiding citizen, a high-speed train)
4) Do NOT use hyphens with modifiers formed of a past or present participle and another word, or in almost any compound modifer AFTER the noun. (The eggs are well cooked. The board is 12 inches wide.)
5) Do NOT use hyphens when the word very is part of the modifier. (very well qualified, very pale faced)
6) Numbers that form modifiers are usually hyphenated (48-inch ruler, five-yard penalty) EXCEPT in modifiers with percent and in amounts of money ($10 million project)
7) Do NOT hyphenate foreign phrases used as modifiers, EXCEPT for laissez-faire.
A laissez-faire attitude toward hyphens is not to be encouraged, but neither is insanity.