Alan Greenspan's "Mistake": Some Theological Reflections

It may be a long time before we hear another Federal Reserve Board Chairman admit the kind of mistake that Alan Greenspan did recently. Typically, gurus neither admit mistakes nor concede even the possibility of making one. There has been no bigger guru around than former chairman Greenspan these past few years, so his very public confession is a big deal, and he deserves a lot of credit for being a mensch about it.

Not to kick a man who has already taken himself down, I do think that "mistake" is not quite the right word for what this good man is talking about. A fundamental and global error in thinking may be more like it. But no matter: confession is the first step toward being forgiven. The second is learning something from the experience of both, which is what this column is all about.

Alan Greenspan's admission is edifying because it immediately transcends economic theory, even though it is expressed in explicitly economic categories. Certainly it has to do with ignoring the fatal flaws of what George Soros has called "market fundamentalism," a dogma roughly approximate in status to Papal Decrees, to the effect that markets work better for the heavy hitters to the extent that they are unregulated and for the great unwashed to the extent that heavy hitters' capital gains trickle down to them. But what Mr. Greenspan has let us in on about this dogma points straightaway to its deepest problem, a naïve misunderstanding of what human beings --- all of us --- are really like. Mr. Soros elaborates on this point in philosophical terms. I think the issue at stake is even better thought through as an exercise in theological anthropology, viz. with reference to what the Christian tradition has wisely said about "fallen" human nature.

What apparently upset Greenspan the most about the economic catastrophe that has befallen us is the failure of leaders in the financial sector to pursue their self-interests in an enlightened, rational manner, as they were supposed to do. Instead, they allowed greed to overwhelm their common sense, thereby infecting the whole system that is designed to run on the basis of rational deliberation with impulsive, self-serving behaviors run amok. The "mistake" the former Chairman says he made was his failure to notice signs of infection early enough to innoculate the system with just enough virus-destroying regulation to restore it to health. Sadly, however, the mistake is much bigger than just this.

And it has been with us for some time, from at least the first publication of Adam Smith's An Inquiry into the Nature and Causes of the Wealth of Nations, in 1776 no less. In his own right, this Scottish moral philosopher ("economics" had not been invented yet) offered something of a Declaration of Independence on his own, defending the pursuit of wealth unfettered by external powers, save that of the marketplace's own "iron hand," as not only a good but a trustworthy thing, given human beings' innate proclivity to temper the pursuit of self-interest by disinterested, rational considerations. Ironically, in the same year David Hume's Dialogues Concerning Natural Religion, which dealt a death blow to the idea of a Providential Presider over human cupidity, were published posthumously as Hume himself had provided for.

200 hundred years later, the exercise of rational control over the pursuit of self-interest was rapidly going by the wayside in our own country. In the 1980's, one of the biggest market manipulators of all, Ivan Boesky, summed it up well: Greed is right. Michael Douglas' Academy Award creation, Gordon Gekko, preferred putting it as greed is good. So much for rationally-driven self-correction, either of a global economy or an individual's character.

Fellow coveters, forgive me for hyping this next sentence with caps that I usually work hard to avoid; ordinarily they remind me too much of the mindless OMG of computer-speak. But here it is: Greed IS NOT right, and it IS NOT good. It is a sin, and a deadly one at that, no matter what word may be substituted for it (envy and lust come to mind immediately). It corrupts human inclinations, character, and institutions quickly, and like compulsions and addictions in general it cannot be brought under control without the "iron hand" of regulations and regulated regulators, and without the hope that help will be available from an Almighty and Merciful hand with a grip on us that is infinitely stronger than our own.

The fact of the matter is that human beings are in general very far from being the rationally self-interested beings that Alan Greenspan apparently supposed us to be. We are much more like the Laban and Jacob of Genesis 31:49, kept at peace only by a contract which includes a petition to the Almighty to watch between them while they are apart from one another, because they cannot trust one another to do the watching themselves.