Friday, October 24, 2008

Does Greenspan Deserve a Tarnished Legacy?

In "When Genius Failed," Roger Lowenstein says that the government's failure to regulate "railroad speculation" was one of the proximate causes of the Great Depression. For years afterward, economists looked at that moment as a lost opportunity to prevent one of the decade's biggest human tragedies.

Whatever happens in the next few months (and it might not rival the Great Depression, it might not even come close), people will probably say the same thing about Alan Greenspan and derivatives.

And yet: I wonder if Greenspan deserves to have his legacy tarnished so badly over this. He made a mistake on derivatives and on housing (both the same mistake: lack of oversight and regulation) but he made a lot of good calls on economic growth during the technology years, years during which it was really difficult to make those calls.

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