Saturday, October 25, 2008

More On Ayn Rand & Alan Greenspan

Yaron Brook, executive director of the Ayn Rand Center for Individual Rights (a division of the Ayn Rand Institute) has commented on Alan Greenspan's assertion that he has found a flaw in his free market philosophy, pointing out that Greenspan hasn't had anything resembling a free market philosophy for several decades.

Meanwhile, Dean Baker presents a very distorted and misleading interpretation of Ayn Rand's philosophy in light of the actions and comments by former follower Alan Greenspan.

"First, insofar as Greenspan acted (or didn't act) out of ignorance of the true situation, it was because he was ignoring Ayn Rand, not because he was following her...

...What would Ayn Rand expect to happen? On the one hand we have the hot shot executives, on the other hand the schmucks who own stock in these banks. Would Ayn Rand expect that the executives would put aside their ambition, their lust for success, their greed, in order to benefit shareholders who are too dumb to even know what a credit default swap is?

Not for a second; Ayn Rand would watch the Wall Street big boys run roughshod over their shareholders' interests and be applauding them every step of the way. That is how the game is played. If Greenspan didn't think the Wall Street crew would rip off their shareholders for every last penny, then he was not a worthy disciple of Ayn Rand."

Apparently, Baker only knows that Rand argued for egoism, while ignoring that part about how her version of egoism, which she called rational egoism, precludes deceit and reliance on government subsidies. He also appears to have missed that Rand argued for free markets, as he later correctly notes that today's financial industry is not anything remotely resembling a free market, and that the Wall Street executives he claimed Rand would celebrate does not want free markets, because under a free market they wouldn't have been able to get away with this kind of rip-off.

Rand's reputation is clearly damaged today by her former association with Greenspan, something which is partly deserved, partly undeserved. On the one hand, she certainly did err in ignoring the warning signs that were apparent already in the 1970s (With Greenspan supporting some of Gerald Ford's stupid ideas, including the "Whip Inflation Now"-buttons(he now claims to have considered the buttons stupid, but at the time he endorsed them, meaning he was either lying then or now)) about Greenspan's flawed character and non-commitment to her principles. On the other hand, Greenspan got much worse after her death, and had she been alive today, even she would have almost certainly given up on him and rejected him just as much as Yaron Brook has done.


Anonymous Per-Olof Samuelsson said...

If there ever is an earthquake in New York, it is Ayn Rand rotating in her grave over some statement from Alan Greenspan!

5:11 PM  
Anonymous Per-Olof Samuelsson said...

Btw, even in Greenspan's old essay "Gold and Economic Freedom" (which is otherwise good), there is a passage that I can only read as an endorsement of "fractional reserve banking". And since this essay was published under Ayn Rand's auspices, it would seem like an implicit endorsement from her, as well.

Now, Ayn Rand herself wrote some very good things on economics - such as "Francisco's money speech" in "Atlas", or "Egalitarianism and Inflation" in "Philosophy: Who Needs It". Unfortunately, she does not seem to have studied "Austrian" economics in depth. If she had, we would be much better off today. At least, we would avoid some very stupid ideas coming out of the mouths of Objectivists! (I'm thinking of one Objectivist in particular, and I think you can guess whom...)

8:03 PM  
Blogger stefankarlsson said...

Yeah, I think I know whom....
Regarding fractional reserve banking, Yaron Brook in the first article I linked to does have a Austrian-sounding analysis of the cause of the crisis, but he characterize it as the analysis of free banking advocates. It is unclear whether "free banking" means fractional reserve banking or 100% reserve banking. Usually, it is advocates of free fractional reserve banking that use the term "free banking", but since the Austrian analysis is applicable as an argument against free fractional reserve banking as well I find it strange that he would characterize it as the distinct analysis of free fractional reserve banking advocates.

8:49 AM  
Anonymous Per-Olof Samuelsson said...

For those unfamiliar with the issue I should mention that the person we refer to is Richard Salsman.

Also, I think it is possible that Brook is influenced by Salsman. (ARI people tend to be "salsmanites".) But I cannot claim a 100% reserve certainty on this.

5:43 PM  
Blogger Brad Williams said...

I have wondered about how Greenspan's endorsement of FRB made it past Ayn Rand's editing, as well. I think there are two possibilities: Rand thought she understood and she did actually agree with Greenspan's statements on FRB; OR she was not sure, admitted to herself she was not an economist, and allowed him to state his expert opinion on the matter, probably after he gave her a plausible argument for it.

Personally I find FRB to be improper for philosophical reasons, so my speculation is that the inclusion of Greenspan's words could not have been a positive endorsement of the principle of FRB by Rand, the master of philosophy. She was the editor of the article, not the author, after all.

9:38 PM  

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