I Have Found a Flaw


“I Have Found a Flaw.”

When the history of our age is written and people have recaptured their world and their peace from sociopaths now running the world, these words of Alan Greenspan will mark the age.

Greenspan, the former Chair of the United States Federal Reserve Board, was admitting his lifelong ideology was wrong. He was admitting markets are not self-regulating, despite his economics textbooks saying so. He was admitting his Ayn Rand religion that the role of government in society should be minimal was wrong. Congratulations to him for honesty.

This article by Nobel Prize Winner, economist Joseph Stiglitz tells us more.

Stiglitz: “In 1987 the Reagan administration decided to remove Paul Volcker as chairman of the Federal Reserve Board and appoint Alan Greenspan in his place. Volcker had done what central bankers are supposed to do. On his watch, inflation had been brought down from more than 11 percent to under 4 percent. In the world of central banking, that should have earned him a grade of A+++ and assured his re-appointment. But Volcker also understood that financial markets need to be regulated. Reagan wanted someone who did not believe any such thing, and he found him in a devotee of the objectivist philosopher and free-market zealot Ayn Rand.”

“In November 1999, Congress repealed the Glass-Steagall Act—the culmination of a $300 million lobbying effort by the banking and financial-services industries, and spearheaded in Congress by Senator Phil Gramm. Glass-Steagall had long separated commercial banks (which lend money) and investment banks (which organize the sale of bonds and equities); it had been enacted in the aftermath of the Great Depression and was meant to curb the excesses of that era, including grave conflicts of interest. For instance, without separation, if a company whose shares had been issued by an investment bank, with its strong endorsement, got into trouble, wouldn’t its commercial arm, if it had one, feel pressure to lend it money, perhaps unwisely?”

“Self-regulation is preposterous, as even Alan Greenspan now concedes”

On the Bush tax cuts for rich “The cut in the tax rate on capital gains contributed to the crisis in another way. It was a decision that turned on values: those who speculated (read: gambled) and won were taxed more lightly than wage earners who simply worked hard. But more than that, the decision encouraged leveraging, because interest was tax-deductible.”

On stock options as pay for executives “they provide incentives for bad accounting: top management has every incentive to provide distorted information in order to pump up share prices.”

“The incentive structure of the rating agencies also proved perverse. Agencies such as Moody’s and Standard & Poor’s are paid by the very people they are supposed to grade. As a result, they’ve had every reason to give companies high ratings”

“The bailout package was like a massive transfusion to a patient suffering from internal bleeding”

And we are still bleeding because without Proportional Representation we don’t have democracy and we will struggle to change the system.


11 thoughts on “I Have Found a Flaw

  1. “Reagan wanted someone who did not believe any such thing, and he found him in a devotee of the objectivist philosopher and free-market zealot Ayn Rand.”

    It is widely known that sometime between taking the job with Reagan and taking the job at the Fed, Greenspan abandoned free market zealot Rand for the government control zealot of which he was also a devotee, John Maynard Keynes.

    So the ultimate flaw of double devotee Greenspan was more likely that the 2.0 version of his ideology discounted the fact that you can’t have your cake and eat it too.


  2. Kevin,

    First, a correction. I accidentally picked up “Reagan” out of the quote, and meant, of course, Ford who appointed him to the CEA with Rand attending his swearing in ceremony. But no devotee of Rand would take the chair at the Fed as he did after she died other than to preside over its dismantling.

    That Greenspan did take the position is testament to his weak commitment to Rand’s radical capitalist free-market principles. Furthemore, as you will see in this pdf, Greenspan was early on a fan of Keynes, and throughout his life, disinterested in the Austrian economics that Rand enthusiastically endorsed.


  3. I’m familiar with misses.org, but could hardly regard it as a good source. Anyway thanks for the link. I can’t see how it undermines Stiglitz’s position though.


  4. Kevin,

    If you have now glanced at the pdf you see it is from The Journal of Ayn Rand Studies available on but not by mises.org.

    As for the idea that deregulation caused the meltdown, that is like blaming chemotherapy for the deaths of cancer patients who undergo the treatment and succumb to the disease anyway.

    Deregulation frees men to make rational choices in the market as well as irrational ones. But if the irrational choosers are for the most part involved in taking advantage of distortions in the free-market resulting from government interference and are therefore shielded from the consequences that would befall them in a free-market, then no partial deregulation will be sufficient to avoid the impending disaster.

    The anti-capitalists focus only on what they can see that enhances their agenda. They are oblivious of any slowing or mitigation of the disaster that resulted from deregulation, because it does not serve their current campaign to gain total control of the economy.

    They cannot see how much worse it would be under the control they desire. They persistently assume that the order that regulation can bring will be a good. They persist in believing that a group of human beings can manage a world economy better than a free market of billions of human beings can. At the same time that they support their belief with the contention that men are inherently greedy and unworthy to be left free to choose, they maintain that they themselves are exempt from such flaws.

    Deregulation v. regulation is the concretization of the fundamental political alternative facing human beings: freedom v. force. In a world of fallible men, it is advocacy of force that is the “flaw”. There is no moral standard that can justify giving one fallible man the right to rule over the thoughts and actions of another.

    I empathize with your quest to understand events and search for a way to prevent them. But so did Rand. And her conclusion was: prevent fallible men from using force to impose their own errors on others. Charge government with one task and no other, to enforce this principle:

    No person may initiate the use of physical force to gain, withhold, or destroy any tangible or intangible value created by or acquired in a voluntary exchange by any other person.

    To advocate the regulation of anything other than force itself is to opt for force over freedom. That is the choice that brought Greenspan to his knees — and the economy too.


  5. Thanks for lecture Michael, but as in all spheres of human endeavour we need to look at the evidence, not the rhetoric and not the desired model. I’m afraid the evidence is that the “free” market you propose has never existed and will never exist as long as different copies of the MAOA gene exist in humans.


  6. You belie your own critique.

    1) If you were really interested in evidence you would have requested mine for whatever it is you contest instead of tossing faux praise at my rhetorical skills in an attempt to insinuate there is no evidence at all to back any of it up.

    2) The “evidence” you cite that “the ‘free’ market you propose has never existed” actually lends support to my contention that the current economic debacle is not the result of Objectivist politics.

    3) And, that “evidence” is at the same time irrelevant to the validity of a politics that mandates the abolishment of initiated force as a goal of government.

    4) Discovering the vagaries of our genetic makeup will never invalidate volition. Without volition there would be no truth to claim for the discovery itself.

    Pertinent genetic aberrations could be factors to consider by a government seeking to prevent initiated force, but they would not diminish the human moral prerequisite for autonomy over the exercise of one’s own volition. Philosophy and Genetics are both sciences that study man. But they do so from entirely different perspectives — in different contexts — and their conclusions are therefore not miscible or interchangeable.

    The existence of different copies of the MAOA gene does not constitute evidence that a majority of human beings in a particular region can or will ever choose to demand a government that guarantees that all value exchanges shall be voluntary — i.e. a free market.


  7. Dear Michael

    I’m afraid your post it so full of errors and assumptions it would take more time than I’m willing to devote to teach you.

    But just for starters, I did ask for your evidence, and you are veering way too far into the religious rhetoric of your beliefs. My earlier comment on rhetoric wasn’t a compliment – it might have been useful in early ancient Greece, but we’ve moved on from there.

    By the way, the belief in free will is logically identical to a belief in religion. ie crap without evidence. Check out Richard Dawkins or Susan Blackmore. I know it might be confronting, but hey, that’s what looking at the evidence can mean.

    Good luck.


  8. Your statement that there is no evidence for free will presumes you chose to believe and assert that there is no evidence as opposed to the alternative that there is. That in itself constitutes evidence of free will.

    If you assert to the contrary that your position could be or was determined and not chosen, or if you assert that there is no way for anyone to know if it was determined or chosen, then it is merely a physical event in your body without significance to the life of anyone else and the meaning of every word in your blog (not to mention the dictionary) becomes automatically and forever suspect.


  9. You’re in error again Michael. You need to look at the “meaning” assigned to “significance”. Lot’s of things are quite significant for a predetermined unit: survival, reproduction, fun. Perhaps if you don’t understand, you could sit down with your mum and dad or a teacher you trust and they will have time to explain it to you.


  10. Perhaps if you don’t understand, you could sit down with your mum and dad or a teacher you trust and they will have time to explain it to you.

    Don’t miss Chapter 19 of Rand’s “The Virtue Of Selfishness”. It’s all about this sentence and you.


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