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The Real Greenspan


In a recent not-an-interview on Harvard Business Review‘s HBR Blog Network, Alan Greenspan reveals his true self as a central banker and student of ”economics.” One might think that the former Collective member would understand and appreciate the workings of the market, but if there ever truly was a Greenspan like that he’s long gone.

The Greenspan that emerges in this text is a man who romanticizes about economic planning, who believes in his ability to rationally plan and thereby ”save” the market (from itself). It is possible that the author’s anti-market bias shines through in the text’s “heavily edited excerpts,” but the Greenspan that is portrayed is the typical megalomaniacal central banker. And he obviously approaches the study of economics from a purely statistical, quantitative, and inductive point of view.

To illustrate, at the beginning of the “interview” Greenspan expresses his real disappointment about not being able to get down to [statistical] business:

I had an idea of constructing a certain statistical procedure. I called in a bunch of the senior analysts and I say this is what I have in mind. They all said, “Oh, it’s a terrific idea. Let’s do it.”

I said, “I’m going to do this one.” Silence. One guy says, “You’re CEO. You’re a chairman. You do CEO/chairman stuff. We do the research here.” I mean, I was really put down.

Poor Greenspan had the power to rule them (us) all, but was not expected to do “real” economics: fiddle with the statistical models used in controlling the economy.

The “interview” is unsurprisingly littered with talk about looking at the ”data,” as well as phenomena that Greenspan seems to think appear spontaneously. Bubbles, it is suggested in the text, have no obvious cause, but Greenspan, in all his divine experience, has come up with a novel (?) idea: bubbles seem to be preceded by “good central bank performance” (!) and hence by “a prolonged period of economic stability, stable prices, and therefore low risk spreads, credit-risk spreads.” I guess that’s one way of putting it, and staring at the data won’t ever get us closer to the truth than “there seems to be a correlation here.” (Even Paul Krugman knows better.)

This “interesting theory” (according to the author of the article) is obviously not interesting enough to spend time talking about, because the “interview” rushes on to discuss the real problem for the central bank. In Greenspan’s words, “the question is, do you quash the bubbles?” Right, when bubbles mysteriously appear “despite” the central bank’s “performance,” what do you do?

Something tells me there is no good answer to this highly irrelevant question.

Per Bylund is assistant professor of entrepreneurship & Records-Johnston Professor of Free Enterprise in the School of Entrepreneurship at Oklahoma State University. Website: PerBylund.com.

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