Good on Jake Tapper for asking this:
TAPPER: You’ll be testifying about the financial crisis on Wednesday before the Financial Crisis Inquiry Commission. When you testified before Congress in October, you said that you finally saw a flaw in — in the way that you looked at markets, that markets cannot necessarily be trusted to completely police themselves.
But isn’t it — isn’t it more than a flaw? Isn’t it an indictment of Ayn Rand and the view that laissez-faire capitalism can be expected to function properly, that markets can be trusted to police themselves?
GREENSPAN: Not at all. I think that there is no alternative, if you want to have economic growth and higher standards of living, in a democratic society, to have competitive markets. And, indeed, if you merely look at the history since the Enlightenment of the 18th century, when all of those ideas surfaced and became applicable in public policy, we’ve had an explosion of economic growth, and especially in the developing countries, where hundreds of millions of people have been pulled out of poverty, of extreme poverty and starvation, basically because we have competitive markets.
Randism can never fail, it can only be failed.
furioso ateo
I don’t know how Randroids do it. The cognitive dissonance would make my own head explode if I tried the intellectual contortions they did.
IndieTarheel
OK, who is this interviewer, and what did he do with the real Jake Tapper?
furioso ateo
So is Jake Tapper one of the good ones? I have trouble keeping it straight between whom I should expect good things from, Ezra, and those I can safely ignore, Friedman et al.
Silver
Here’s the problem:
The bullshit (I know, you think it’s philosophy, but in that case so are Dick and Jane books) that Ayn Rand wrote defines capitalism for both Tapper and Greenspan, apparently.
The villager mindset is so far right, that this seems to be an accepted and settled point. That’s a huge problem.
Undercover FBI Agent DougJ
I have trouble keeping it straight between whom I should expect good things from, Ezra, and those I can safely ignore, Friedman et al.
Tapper is a straight reporter, not an opinion person. I don’t always love his work but I think he’s better than Dancin’ Dave and Rick Moran’s brother, for example.
Undercover FBI Agent DougJ
The bullshit (I know, you think it’s philosophy, but in that case so are Dick and Jane books) that Ayn Rand wrote defines capitalism for both Tapper and Greenspan, apparently.
I think that it does define the pixie stuff form of capitalism that Greenspan believes in and Greenspan is openly a Randroid. So I think it was good, fair question from Tapper.
Brian J
Why is it only a choice between financial companies running things (and the country as a whole) with no strings attached or the complete and utter nationalization of Wall Street? There’s a fairly wide space between those two extremes, to say the least.
Greenspan probably understands that, or so I would think when he says this:
Unless he’s saying that the comparison is apples and oranges, I am not sure why he feels the need to pepper his statements with “Yes, but.” I don’t think anybody is really suggesting that communism is the answer.
beltane
Putting a follower of Ayn Rand in charge of the Federal Reserve is like putting a follower of the Marquis de Sade in charge of a child care center.
Quackosaur
@Brian J:
Because like any group motivated by ideological purity, going half-way is no different (and possibly worse) than the most hated, evil thing ever; after all, nobody likes fence-sitters and people who can’t decide.
gwangung
More like, “Putting a follower of Ayn Rand in charge of the Federal Reserve is like putting a Catholic priest in charge of young children.”
Oh. Wait.
Violet
A market left to itself will function properly. The problem is that there are humans involved. Humans don’t allow the markets to function freely.
Trader A gets inside information and leaks it to Investment Banker A, who then has Traders B, C or D buy or sell based on the info – and that affects the market. Investment Banker B, meanwhile, golfs at the same club as the CEO of said company, and double checks/passes on info while on the links. CEO returns favor next week by leaking additional info to Investment Banker B.
All of that is not exactly the “free market,” but people like Greenspan don’t see that.
When government is working properly, it actually makes sure the markets are operating more “freely” – as in, free from all this insider-info and other things that clog up the market.
Markets that operate properly can help the middle class grow capital and help the poor come out from poverty. Markets that help only the well-connected and the rich don’t do either of the above.
Zach
I’m fairly certain there was a period somewhere within this Utopian period that Greenspan cites during which massive monopolies arose within the relatively unrestrained free market, and rational corporate decisions resulted in negative consequences for everyone else. Not to be confused with the period in which companies deemed too-big-to-fail made rational decisions with horrible consequences for everyone else.
scav
Violet. OK, so the problem with markets is that there are people involved.
BR
Hundreds of millions of people were pulled out of poverty and starvation largely because of fossil fuels: natural gas-based fertilizers that powered the green revolution in agriculture and oil that powered the industrial boom of the 20th century.
Of course now that we’re entering a phase of depletion of these fossil fuels and they’re causing climate problems, it’s not capitalism’s fault.
Zach
@BR – I don’t get it. We couldn’t have struck oil without the invisible hand of the free market pointing the way.
scav
Recycled from last thread.
Another thing that always irks me is when economic laws are supposed to work like laws of gravity. Practically, it’s a socio-cultural system. If geography worked like economics, we’d be bull-dozing and tefloning the entire planet so that the real world better matched our expectations based on modelling of the Isotropic Plane.
OK, The Deification and Reification of Simplifying Assumptions rant for 2010, check. [x2]
Ailuridae
Good on Tapper. I tend to find him problematic and overly willing to pass on the “he said, she said” elements to political discussions but here he does excellent work.
FWIW, I really disagree with the notion that Ayn Rand defines capitalism for Tapper. If that were the case how does this question make any sense:
But isn’t it—isn’t it more than a flaw? Isn’t it an indictment of Ayn Rand and the view that laissez-faire capitalism can be expected to function properly, that markets can be trusted to police themselves?
It is clear from Greenspan’s answer that he thinks a Randian world view is capitalism but Tapper’s question, to me, seems to indicate its a specific view of capitalism and, possibly, a perverse one.
Alex S.
If he is so laissez-faire, why didn’t Greenspan advocate the abolishment of his own position and the institution he worked at?
Jennifer
There’s nothing technically wrong with Greenspan’s answer, but it was the answer to a different question, and Tapper let him slide on it. Greenspan replies “Not at all” to Tapper’s question about the meltdown being an indictment of Randian thought and the unregulated free market, and Greenspan, instead of defending how an unregulated system is better than a regulated one, goes on to recite general capitalist boilerplate about the value of competitive markets which few would dispute.
But that’s not what he was asked about. You can obviously have both regulation and competitive markets simultaneously; the Randian trope is that there is no need for regulation, which Greenspan himself has admitted he was wrong about. And Tapper didn’t press him on it.
Tapper FAIL.
Alex S.
Randism = Calvinism without God.
Silver
If Tapper didn’t think that Randism=Capitalism, he could have phrased the question in such a way that made clear that Greenspan’s thoughts on economics are based on the same principles at Tom Cruise’s thoughts on psychiatry.
But, since villagers live in a world where Adam Smith doesn’t define capitalism but Rand does, Tapper gets to ask a question that looks tough and then doesn’t ask a followup when Greenspan goes down on Rand for the 5000th time…
Chad S
Didn’t Greenspan talk about how Randism failed in the financial crisis?
El Cid
Greenspan is a consciously manipulative pathetic liar; his “answer” is no more a response than someone asked about Soviet Communism as a failed ideology and responding how “there should be government interventions to assist people with social programs and to control inherent market risks and this has traditionally been needed.”
He’s a liar. He’s a liar in the service of the ideological fetish he’s grabbed and in favor of the types and classes of people he favors.
Citizen_X
Argh! Economies expanded because the Enlightenment produced scientific and technological revolutions, that enabled population growth, the fossil fuel age, and mechanization. The Holy Free Market cannot be solely responsible for this expansion, as demonstrated by the fact that economies also grew IN ALL COMMUNIST COUNTRIES!
[Pardon my yelling. But I’m not letting Randroid Masters of the Universe take the credit for what scientists and engineers accomplished.]
El Cid
To reiterate: discussing the existence of markets has nothing to do with Ayn Rand.
Adam Smith didn’t have to fucking clarivoyantly read that shallow, trite, serial-killer fetishizing idiot in order to philosophically discuss both the advantages and disadvantages of market activity.
Any jackhole who thinks a discussion of the pseudo-philosophical L. Ron Hubbard prototype Ayn Rand is a part of the discussion of the history of (what would come to be called) capitalism and industrial development is either a mindless ignoramus or, in the case of Greenspan, a committed liar.
The Grand Panjandrum
Mr. Andrea Mitchell continues to speak in very opaque and misleading terms. He’s just continuing the oblique language he used while Fed Chairman.
Kirk Spencer
@11 Violet.
Actually, I’ll disagree. The problem with idea that markets work is that it’s an idea, not reality.
“Markets” work because everyone has perfect information. It works because all people involved are “rational”. (Economic term, has nothing to do with sanity. “Rational” means everyone makes choices on a balance of all costs and benefits to themselves.)
Reality, however, doesn’t have perfect information. You mentioned some examples. Some information doesn’t get out, some false information is introduced, some people get information faster than others, and so forth. Additionally, some people will make irrational choices. They’ll select a lesser good to prevent others from getting anything at all, for example. They’ll select short-term gains over long-term even when doing so is completely destructive long-term. And so on, and so forth.
It’s a great example of a Yogiism. “In theory, theory and practice are the same. In practice, they aren’t.”
Jennifer
Putting a follower of Ayn Rand in charge of the Federal Reserve is like putting a follower of the Marquis de Sade in charge of a child care center.
I’ve thought for a long time that the quality you most want in the people who regulate the markets is cynicism or downright misanthropy. Understanding numbers is really of somewhat secondary importance to having the wide sweep of imagination and distrust of humanity required to think of all the myriad ways individuals will invent to benefit themselves by screwing over the other guy. In regulation, you need to expect the worst out of people, not hope for the best. Without that frame of mind, you’ll be ineffective at best or, as in Greenspan’s case, disastrous.
That’s what I never got about the health care debate. I thought the whole thing could pretty easily be summed up with the idea that it’s not good policy to create situations in which some people stand to profit by allowing other people to die, which is what we’ve had in our largely unregulated private medical insurance market. When someone stands to – and is allowed to – profit by allowing others to die, people who would have otherwise lived will die. At least the government doesn’t have a profit motive in letting me die. Given those choices, I’m pretty clear on who I’d rather have standing between me and my doctor. I think the majority of people would be, if it was explained in that way. What I wouldn’t give for effective Democratic messaging.
Sly
18th Century Free Market capitalism was a response to government-sanctioned private monopolies over trading rights, which had the tendency of enriching the aristocracy and corrupting national politics. The Wealth of Nations was basically a case study of how this came about in Britain through the East India Company. It wasn’t a critique of government as a limiter of negative externalities. In the time of Adam Smith, government was the cause of negative externalities. Duh.
I love Randroids. They don’t know what mercantile capitalism is, but pay endless homilies to guy who made a name for himself by criticizing mercantile capitalism.
@El Cid:
False choice. One can be both a mindless ignoramus and a committed liar. Or alternate between the two depending on which is more profitable at the moment.
El Cid
On this:
In the specific case of Greenspan, it’s not a false choice in my view. He’s a smart man and a committed and cynical ideologue and like most propagandists knows very well what he’s lying about so that he can more effectively advertise for and push his goals.
Plenty of lying ignoramuses abound. Greenspan’s momentary humility in the face of the collapse he eagerly assisted aside, his policies were in no way the result of a lack of understanding. He just cared about the things he cared about, and didn’t give a shit about the things he didn’t give a shit about. Like many, many others.
mclaren
Greenspan:
We’ve also had a tremendous explosion of economic growth, and especially in the developing countries, since Star Trek reruns started in the 1970s.
Clearly Star Trek reruns are responsible for this huge increase in income in the developing world.
BZZZZT. WRONG!
Correlation is not causation.
Hasn’t this ignoramus ever taken a course in elementary statistics? Did this guy actually run the most powerful central bank in the world…?
Ye gods. That’s scary.
Those of you interested in the attitude of the hard sciences toward economists may want to take a look at this paper:
WARNING: Physics Envy May Be Hazardous To Your Wealth!
Authors: Andrew W. Lo, Mark T. Mueller
(Submitted on 13 Mar 2010 (v1), last revised 20 Mar 2010 (this version, v3))
Abstract: The quantitative aspirations of economists and financial analysts have for many years been based on the belief that it should be possible to build models of economic systems – and financial markets in particular – that are as predictive as those in physics. While this perspective has led to a number of important breakthroughs in economics, `physics envy’ has also created a false sense of mathematical precision in some cases. We speculate on the origins of physics envy, and then describe an alternate perspective of economic behavior based on a new taxonomy of uncertainty. We illustrate the relevance of this taxonomy with two concrete examples: the classical harmonic oscillator with some new twists that make physics look more like economics, and a quantitative equity market-neutral strategy. We conclude by offering a new interpretation of tail events, proposing an “uncertainty checklist” with which our taxonomy can be implemented, and considering the role that quants played in the current financial crisis.
Source: Physics arxiv: 1003:2688v3
El Cruzado
My question is how anyone can expect a person that espouses an ideology based on “I’m getting mine, screw you” to have anyone else’s best interests at heart.
Allan
I think a better question would have been, “Who’s a bigger hellcat in bed, Ayn Rand or Andrea Mitchell?”
Econwatcher
I had been giving Greenspan a smidgen of credit because, in his testimony before Congress last year, he seemed genuinely reflective and remorseful, and appeared as if he might even be giving his worldview a re-think. So much for that. Once a DB, always a DB, I guess.
Calvin Jones and the 13th Apostle
Silver @ 4:
I don’t think you understand. Greenspan was doing with Rand what Rich Lowry can only wish he was doing with “The Quittah from Wasilla.”
RSA
Transcript of Greenspan’s ‘flaw’ admission:
END QUOTE (Goddamn Ajax)
As some of the commenters above have noted, Greenspan is just being a weasel now.
Calvin Jones and the 13th Apostle
Allan @ 33:
Probably Rand. Besides, Mitchell doesn’t strike me as the dominatrix type.
Silver
@ Calvin:
No, I fully understand Greenspan’s background. I was commenting on Tapper, not Greenspan.
Hart Williams
Didn’t exactly work for the American Indians, as Rand herself explains that wonderful theory of hers:
(she continues. The blockquote mechanism is too cranky to deal with):
I believe, with good reason, the most unsympathetic Hollywood portrayal of Indians and what they did to the white man. They had no right to a country merely because they were born here and then acted like savages. The white man did not conquer this country. And you are a racist if you object, because it means you believe that certain men are entitled to something because of their race. You believe that if someone is born in a magnificent country and doesn’t know what to do with it, he still has a property right to it. He does not.
[…]
As a principle, one should respect the sanctity of a contract among individuals. But I oppose applying contract law to American Indians. When a group of people or a nation does not respect individual rights, it cannot claim any rights whatsoever. The Indians were savages, with ghastly tribal rules and rituals, including the famous “Indian Torture.” Such tribes have no rights. Anyone had the right to come here and take whatever they could, because they would be dealing with savages as Indians dealt with each other – that is, by force. We owe nothing to Indians, except the memory of monstrous evils done by them.
March 6, 1974, United States Military Academy, West Point, NY
Now, apply that to anyone ELSE that you don’t like. Unions. Poor people. Whomever. What a wonderful economic theory.
RSR
>>if you want to have economic growth and higher standards of living
The indictment could be that it’s not that our standards of living could be higher, it’s that so few live the higher standards.
morzer
It’s also perfectly possible for the economy to grow, but household incomes to remain static, or even go down in value. Funnily enough, this seems to only affect the middle and lower classes. If my memory doesn’t deceive me, the phenomenon seems to coincide with GOP management of the economy.
DougL (frmrly: Conservatively Liberal)
Fix’t?
Snarky Pickles
Randism is much easier to understand if you accept that it’s simply “I got mine; y’all can fnck off” dressed up as a philosophy.
patrick II
Here’s an interesting thing I found at the wiki article on Greenspan.
In 1977, NYU awarded him a Ph.D. in Economics. His dissertation is not available from NYU [6] since it was removed at Greenspan’s request in 1987, when he became Chairman of the Federal Reserve Board. However, a single copy has been found, and the ‘introduction includes a discussion of soaring housing prices and their effect on consumer spending; it even anticipates a bursting housing bubble’.[7]
I don’t know what to say. To write a paper about a potential fiscal crisis exactly as it might happen, and to be the Fed Chairman up until 2006 when much of the groundwork for the crisis was laid, and to do absolutely nothing as he watched his own prediction come true…what explains that?
Cacti
The Randroids still haven’t come up with a satisfactory answer to the following…
In a world full of John Galts, who scrubs the toilets?
Chris Johnson
The slaves, of course. If you don’t like that, YOU scrub the toilets! ;P
mai naem
Don’t forget the bit in the interview where he goes on about how the CBO’s predictions could be wrong and we can’t afford it at this point in time because of the debt situation of the US. Hey, a-hole – why didn’t you give a crap about the debt situation in 01 and 03 when it came to giving tax cuts to the very rich. Furthermore, this scumball is still in favor of abolishing capital gains. I better never see this scumball on the street because I will give him such a piece of mind that Andrea Mitchell will be complaining about it on Morning Ho for weeks about the lack of civility in the nations discourse.
Jennifer
In a world full of John Galts, who scrubs the toilets?
The peasants, of course. And they do it for a pittance, because being in close proximity to John Galt’s shit is payment more than they are worth in the first place.
Jamie
Marxism has many of the same problems as Randism, both aren ‘t good for human societies.
El Cid
On this:
Marx did quite a lot of early scholarly work on the political-economics of capitalism. You could at least make a good argument for the intellectual value of his econo-philosophical works.
Ayn Rand, on the other hand, was a cheap fetishist of serial killers and selfishness written about in crappy novels.
L. Ron Hubbard’s Scientological views would also be bad for human societies, but for some reason Ayn Rand’s crazy screeds are considered serious to discuss (i.e., they favor the philosophy of the worshipers of the most venal and greedy) while L. Ron Hubbard is, rightly, regarded as a delusional crank.
BruinKid
Ugh, the comments section of the ABC piece are flooded with Peter Schiff supporters saying he should debate Greenspan. I think they’re Paultards, as Schiff was one of Paul’s economic advisers.
Now, what does Schiff think? If you thought Randism was bad, Schiff thinks there should be even LESS regulation as a result of our financial crisis. Oy.
DH Walker
Of course, Tapper was talking about the inherent flaws in completely unregulated capitalism, and Greenspan responds as though Tapper is talking about all capitalism. That’s some slick douchebaggery there, Alan.
alano
All of the current economic problems have been caused directly or indirectly by gov’t intervention in the marketplace. Each set of gov’t laws, controls, regulations, and edicts designed to control or manipulate or “manage” some sector of the economy creates all sorts of problems, misallocations, inflation of prices, bubbles – which are then used as excuses to create yet another layer of controls and regulations.
We reach the externalization of all morality. Traditionally, the free market or religion made people behave. (Example: Bank didn’t give loans to people with bad credit.) The harshness of the free market makes liberals all teary eyed, so they create laws or subsidies or incentives to “soften” the free market (Example: Liberals hate that poor people can’t buy their own homes, so they create Feddie and Fannie to buy up tons of loans, allowing banks to make riskier loans; they further distort the markets with countless subsidies and tax incentives in an effort to make housing more affordable). Lo’ and behold, they get alot more of the bad behavior that used to be punished by the market. (Example: Banks make tons of bad loans, package them, and sell them to Freddie and Fannie.) The gov’t then has to pass laws explicitly prohibiting the bad behavior that used to be punished by the marketplace. In short, the left destroys the market and religion; once the traditional power structures are wrecked, the left is forced to pass more and more laws and regulations to make everyone behave.
Rand was right. There is no such thing as a “mixed” economy. Once the gov’t intervenes, it’s a long, slow, inexorable march toward bankruptcy and then anarchy. Watch Greece. It’s where we’re all headed.
Eli's Hammer
I’ve always wondered if the ‘collective’ was really just that. There is something SO out-of-wack about such left wing bohemians–as was evidenced in the early apartment days of Rand, et al–and the party line of the Randists. What better cover in the tumultuous Cold-War 50’s than an intellectual “ultra-capitalist sounding” collective. Perhaps the inner circle, or at least some of them, were reporting back to Mother Russia? It would make for an interesting book, indeed. A lot of later-day famous people attended those early word orgies.