Greenspan the Scholar?

2003-04-05

Alan Greenspan is a smart man. That doesn't mean he's right all the time. In his early years he was part of Ayn Rand's inner circle and wrote articles about things like the morality of the gold standard. Later on he got involved in government work, which many libertarians see as selling your soul. Certainly you never hear Greenspan talk about the evils of fiat money anymore (after all, he is Mr. Money now). And he's not necessarily a great scholar, either. Case in point: a recent talk he gave at the 2003 Financial Markets Conference. Greenspan argues as follows:

Market economies require a rule of law. A society without state protection of individual rights, especially the right to own property, would not build private long term assets, a key ingredient of a growing modern economy. Yet an excess of rules--in the extreme case, central planning--has also been shown to stifle initiative and produce economic stagnation.

Since its early stirrings in eighteenth century Britain, modern economic development has been characterized by an ebb and flow in the intensity of state involvement in shaping the economic environment. According to the legends of the early American West, the only law west of the Pecos River was administered by Judge Bean. I am not sure how much law that was, but I do know that much protection of property in sparsely settled western communities just after the Civil War had to be privately provided. Understandably, trade was limited in such an environment. Economic growth was greatly facilitated by the emergence of civil government, which provided consistent and predictable enforcement of property rights, among other things.

There could be many reasons for the absence of trade in the Old West: sparse population, self-sufficiency, distance from large markets, and so on. But Greenspan attributes the rise of trading to the extension of monopoly government into the West. Sounds like some historical research is in order.


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