Five years ago, Alan Greenspan, the Federal Reserve Board Chairman, admitted publically to being seriously mistaken about his ability to make accurate economic forecasts. The recession which was just beginning came as a surprise to him.
In a new book, The Map and the Territory: Risk, Human Nature, and the Future of Forecasting, Greenspan re-visits the issue of why he did not see any of the misery coming. It was, he says again, the result of his failure to grasp that financial leaders were not pursuing their own self-interests in the enlightened and rational manner that is essential to a truly market-driven economy.
Or in other words, they were greedy to a fault.
It is troubling that Greenspan still believes that greed in the marketplace can be brought under control easily with just enough regulations — but not too many — put into place at just the right times — but not for too long. A little regulating here and a little de-regulating there is all that is necessary for restoring economic forecasting to its proper place as a science.
The major premise of free-market economics is that profit-seeking serves people best when there are no restrictions put on it by government. Then, profits will trickle downward as they should, from the benevolent spirit and the largesse of its generators, fairly. Tracking the trickle is only a matter of mathematics.
The problem, as most living further down the slope have learned at great pain, is that there is no trickle in their direction. Profit is hoarded at the top.
And with this observation, we move from economics to philosophy and, in my view, inevitably to theology. Alan Greenspan’s “mistake” was not a matter of miscalculation. It was and is a matter of misunderstanding human nature.
In truth, human beings are far from being the rationally self-controlled beings that Alan Greenspan and free-market economists still suppose human beings (or at least, themselves) to be. We are much more like the Laban and Jacob of Genesis 31:49. They kept the peace between themselves only by petitioning to God to watch between them while they were apart from one another.
There is good reason for continuing to regard greed as a deadly sin. When its outward expressions are exempted from adequate and on-going regulation, it can corrupt dispositions, character, and institutions insidiously and even permanently.