Thursday, July 04, 2013

...I had long since decided to engage in efforts to advance free-market capitalism as an insider...

Gerald Ford, Alan Greenspan and Ayn Rand.
And Greenspan's biological mother.
There are six entries on Ayn Rand in Alan Greenspan's 2007 autobiography The Age of Turbulence: a couple crediting her for predicting the fall of the Soviet Union (he also gives credit to Reagan); one in which a member of the Putin government asks if Greenspan wants to discuss Ayn Rand with him (we never get to find out if they did); but the most significant entry is:
Ayn Rand became a stabilizing force in my life. It hadn't taken long for us to have a meeting of the minds - mostly my mind meeting hers - and in the fifties and early sixties I became a regular at the weekly gatherings at her apartment. She was a wholly original thinker, sharply analytical, strong-willed, highly principled, and very insistent on rationality as the highest value. In that regard, our values were congruent - we agreed on the importance of mathematics and intellectual rigor.  
But she had gone far beyond that, thinking more broadly than I had ever dared. She was a devoted Aristotelian, the central idea being that there exists an objective reality that is separate from consciousness and capable of being known. Thus she called her philosophy Objectivism. And she applied key tenets of Aristotelian ethics - namely that individuals have innate nobility and that the highest duty of every individual is to flourish by realizing that potential. Exploring ideas with her was a remarkable course in logic and epistemology. I was able to keep up with her most of the time.  
Rand's Collective became my first social circle outside the university and the economics profession. I engaged in the all-night debates and wrote spirited commentary for her newsletter with the fervor of a young acolyte drawn to a whole new set of ideas. Like any new convert, I tended to frame the concepts in their starkest, simplest terms. Most everyone sees the simple outline of an idea before complexity and qualification set in. If we didn't there would be nothing to qualify, nothing to learn. It was only as contradictions inherent in my new notions began to emerge that  the fervor receded. 
One contradiction I found particularly enlightening. According to Objectivist precepts, taxation was immoral because it allowed for government appropriation of private property by force. Yet if taxation was wrong, how could you reliably finance the essential functions of government, including the protection of individual rights through police power? The Randian answer, that those who rationally saw the need for government would contribute voluntarily was inadequate. People have free will; suppose they refused? 
I still found the broader philosophy of unfettered market competition compelling, as I do to this day*, but I reluctantly began to realize that if there were qualifications to my intellectual edifice, I couldn't argue that others should readily accept it. By the time I joined Richard Nixon's campaign for the presidency in 1968, I had long since decided to engage in efforts to advance free-market capitalism as an insider, rather than a critical pamphleteer. When I agreed to accept the nomination as chairman of the president's Council of Economic Advisors, I knew I would have to pledge to uphold not only the Constitution but also the laws of the land, many of which I thought were wrong. The existence of a democratic society governed by the rule of law implies a lack of unanimity on almost every aspect of the public agenda. Compromise on public issues is the price of civilization, not an abrogation of principle.  
It did not go without notice that Ayn Rand stood beside me as I took the oath of office in the presence of President Ford in the Oval Office. Ayn Rand and I remained close until she died in 1982, and I'm grateful for the influence she had on my life. I was intellectually limited until I met her. All of my work had been empirical and numbers-based, never values-oriented. I was a talented technician, but that was all. My logical positivism had discounted history and literature - if you asked me whether Chaucer was worth reading, I'd have said "don't bother." Rand persuaded me to look at human beings, their values, how they work, what they do and why they do it, and how they think and why they think. This broadened my horizons far beyond the models of economics I'd learned. I began to study how societies form and how cultures behave, and to realize that economics and forecasting depend on such knowledge - different cultures grow and create material wealth in profoundly different ways. All of this started for me with Ayn Rand. She introduced me to a vast realm from which I'd shut myself off.
I find it amazing that he credits Rand with persuading him to look at human beings, their values, how they think, etc. If Atlas Shrugged is any indication, Rand had absolutely no idea how most human beings think, or how the world works, which is why she created her ideal man's world as one in which there were absolutely only two ways of thinking - the Superman way and the moocher/looter way. The government that Rand portrays in Atlas Shrugged is amorphous - its only purpose seems to be to thwart the Randian Supermen, but only sporadically - when it's narratively convenient. The rest of the time it barely exists: the government in Atlas Shrugged appears to have no navy - or one that is so ineffective it is not capable of stopping the hijacking of government aid supplies by one Norwegian pirate.

That Alan Greenspan thinks that Rand had valuable insights into humanity is maybe one of the scariest aspects of Alan Greenspan.

And this is how Alan Greenspan behaved when he was wooing Andrea Mitchell:
It might not be everybody's idea of first-date conversation, but at the restaurant we ended up discussing monopolies. I told her I'd written an essay on the subject and invited her back to my apartment to read it. She teases me about that now saying "What, didn't you have any etchings?" 
But we did go to my apartment and I showed her this essay I'd written on antitrust for Ayn Rand. She read it and we discussed it. To this day Andrea claims I was giving her a test. But it wasn't that; I was doing everything I could to keep her around.
Perhaps it's Greenspan's Rand-derived wrong-headedness about human behavior that  led him to his present state - which Forbes magazine, no enemy of the free market described a month ago as "Alan Greenspan's Epic Incompetence: Another Shoe Drops." article by Bill Black, a former financial regulator, that provides stunning new insights into former Fed chairman Alan Greenspan’s incompetence. 
Posted at the website Naked Capitalism, the article makes dozens of  devastating points which have hitherto received little or no attention in the mainstream press. This may reflect the fact that the press groveled at Greenspan’s feet for so long in the pre-crash era (Bob Woodward WWD +0.35%, the doyen of Washington scribes, even entitled his notoriously naive Greenspan biography “Maestro”).
One of the examples of Greenspan's incompetence listed is:
Greenspan opposed  attempts by Brooksley Born, chair of the Commodities Futures Trading Commission, to crack down on fraud.  Greenspan allegedly told Born that there was no need for a law against fraud. Greenspan was such a true believer in the efficient markets hypothesis that he apparently genuinely believed that market action alone would quickly prove an effective prophylactic against fraud. Black comments: “Greenspan, with the rabid support of the Rubin wing of the Clinton administration, along with Republican Chairman of the Senate Banking Committee Phil Gramm, crushed Born’s effort to regulate credit default swaps (CDS). The plutocrats and their political allies deliberately created what’s known as a regulatory black hole – a place where elite criminals could commit their crimes under the cover of perpetual night.”
Greenspan does not have a single reference to Brooksley Born nor the CFTC in his book.

*written before his infamous "mea culpa" a year later:
Here’s a fascinating exchange between Alan Greenspan and Representative Henry A. Waxman from today’s hearing on Capitol Hill (as reported by Michael Grynbaum):
Referring to his free-market ideology, Mr. Greenspan added: “I have found a flaw. I don’t know how significant or permanent it is. But I have been very distressed by that fact.”
Mr. Waxman pressed the former Fed chair to clarify his words. “In other words, you found that your view of the world, your ideology, was not right, it was not working,” Mr. Waxman said.
“Absolutely, precisely,” Mr. Greenspan replied. “You know, that’s precisely the reason I was shocked, because I have been going for 40 years or more with very considerable evidence that it was working exceptionally well.”