Alan Greenspan, former Fed Chairman, has a new book out called “The Map and the Territory.” During his years as Chairman, he was widely hailed as a brilliant thinker and masterful manager of the economy. And then came the Great Recession.
I haven’t read the book, but from reviews and interviews it’s clear the recession pulled a big rug out from under him. Despite our long history of doing very stupid things with money that have resulted in more than a dozen banking crises in the history of our country, Greenspan believed that the financial sector was now smarter than that, and that banks and insurance companies now had access to the information they needed to make informed, reasonable, rational decisions.
As a young man, Greenspan was deeply influenced by Ayn Rand. I wrote about her last summer, so you know what I think of her view of human nature, money and government. While Greenspan (to the best of my knowledge) has not specifically rejected the philosophy of his early mentor, the conclusion is clear. As a species, we are at best semi-rational. We can be blind to even the most accurate information if money is involved. The opportunity to make more of it is too overwhelming to too many of us to resist.
We don’t live anymore in small groups. We have gathered together in nations and have agreed in broad terms that we need a dependable structure to ensure the health of our nation. The foundation of that health is economics. With the exception of some religious and ethnic conflicts, all wars and revolutions are rooted in economics. Nations go to war over resources and people revolt in the face of economic inequality.
Fringe theories like Rand’s are not the basis for the kind of sustainable economic strength we need to thrive as a nation. She died in 1982. Let’s now finally bury her.