Let’s examine Greenspan’s reason for abandoning what he considers the free market. His reason is that free markets cannot be entirely trusted, since government regulators in charge of free markets cannot forecast with 100 percent accuracy. “Yes, I found a flaw,” Greenspan said in response to grilling from the House Committee on Oversight and Government Reform.
“That is precisely the reason I was shocked because I'd been going for 40 years or more with very considerable evidence that it was working exceptionally well.” He went on to say: “We cannot expect perfection in any area where forecasting is required.” He also said: “We have to do our best but not expect infallibility or omniscience.”
The media spun this as Greenspan abandoning free market principles. Maybe that is what Greenspan intended to convey, or maybe it wasn’t. But one thing is certain, regardless of his motives. Greenspan is not condemning the free market and capitalism. He is simply acknowledging the obvious:
That government regulators – even the chief government regulator, the Federal Reserve Chief – cannot be omniscient, cannot know everything, and cannot predict everything.
The irony of these comments is that Greenspan, whether he intends to or not, is providing one of the best arguments in favor of free markets and capitalism by demonstrating that man is not capable of controlling and forecasting everything. Therefore, it’s best to leave man alone, on an individual case-by-case basis, to assess what makes most economic sense.
Wednesday, March 4, 2009
Capitalism Magazine has an article by Michael Hurd, "Alan Greenspan, Meet Reality" which demonstrates that Alan Greenspan's latest comments on the failure of the current system are actually evidence in support of a return to the free market. Here is a key excerpt: