Rand
(related great one hour lecture by Eliot Spitzer: http://fora.tv/2010/01/26/Eliot_Spitzer-The_Cataclysm_of_2008-2009 )
Very sharp quotes from Paul Samuelson in The Atlantic on Easy Al, and the ability of markets to self-regulate:
“The craze that really succeeded the Keynesian policy craze was not the monetarist, Friedman view, but the [Robert] Lucas and [Thomas] Sargent new-classical view. And this particular group just said, in effect, that the system will self regulate because the market is all a big rational system.
Those guys were useless at Federal Reserve meetings. Each time stuff broke out, I would take an informal poll of them. If they had wisdom, they were silent. My profession was not well prepared to act.
And this brings us to Alan Greenspan, whom I’ve known for over 50 years and who I regarded as one of the best young business economists. Townsend-Greenspan was his company. But the trouble is that he had been an Ayn Rander. You can take the boy out of the cult but you can’t take the cult out of the boy. He actually had instruction, probably pinned on the wall: ‘Nothing from this office should go forth which discredits the capitalist system. Greed is good.’ (emphasis added)
I also like this take on assuming rationality in bubbles:
“However, unlike someone like Milton, Greenspan was quite streetwise. But he was overconfident that he could handle anything that arose. I can remember when some of us — and I remember there were a lot of us in the late 90s — said you should do something about the stock bubble. And he kind of said, ‘look, reasonable men are putting their money into these things — who are we to second guess them?’ Well, reasonable men are not reasonable when you’re in the bubbles which have characterized capitalism since the beginning of time.”
“The craze that really succeeded the Keynesian policy craze was not the monetarist, Friedman view, but the [Robert] Lucas and [Thomas] Sargent new-classical view. And this particular group just said, in effect, that the system will self regulate because the market is all a big rational system.
Those guys were useless at Federal Reserve meetings. Each time stuff broke out, I would take an informal poll of them. If they had wisdom, they were silent. My profession was not well prepared to act.
And this brings us to Alan Greenspan, whom I’ve known for over 50 years and who I regarded as one of the best young business economists. Townsend-Greenspan was his company. But the trouble is that he had been an Ayn Rander. You can take the boy out of the cult but you can’t take the cult out of the boy. He actually had instruction, probably pinned on the wall: ‘Nothing from this office should go forth which discredits the capitalist system. Greed is good.’ (emphasis added)
I also like this take on assuming rationality in bubbles:
“However, unlike someone like Milton, Greenspan was quite streetwise. But he was overconfident that he could handle anything that arose. I can remember when some of us — and I remember there were a lot of us in the late 90s — said you should do something about the stock bubble. And he kind of said, ‘look, reasonable men are putting their money into these things — who are we to second guess them?’ Well, reasonable men are not reasonable when you’re in the bubbles which have characterized capitalism since the beginning of time.”
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