Tuesday, July 07, 2009

Ed Glaeser's Pathetic Defense Of Greenspan

Ed Glaeser, economics professor at Harvard University, dismisses the theory that Alan Greenspan's low interest rate policy caused the housing bubble with this argument:

"Mr. Greenspan’s loose monetary policy may have been a mistake, but low interest rates cannot readily explain what happened to housing prices. Real rates actually rose slightly between 2002 and 2006. "

Huh? In 2002, the housing bubble was inflating, in 2006 the housing bubble was deflating. So, by his own criteria of relevant evidence, he is supporting the theory he is trying to deny. Apparently, Harvard doesn't have high standards when it comes to basic reasoning abilities or logical coherence. Needless to say, Glaeser was as clueless as most professors were in predicting the current crisis.


Blogger t said...

not the best critique of interest rate policy, I'd have thought. A better argument would surely be that if the correct rate is, say 5% real, and Greenspan raises real rates from -1% to +1%, then rates are too low through the entire period; it's not the direction of rates that is important - it's the gap between what rates are and what they should be.

8:48 AM  

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