There is an amazing piece of investigative and analytical journalism on the HuffPost showing how the Federal Reserve and its market-is-always-right kind of economic theory has shaped the entire economics profession. We all need to read—and re-read—this piece. It shows how ideology, not social science professionalism, shaped policy in the US and around the world (since the US exported this ideology everywhere). And it shows how Alan Greenspan, believer and enforcer of this ideology, was instrumental in promulgating it—until he admitted he was totally wrong.
Here is the quote that I love most:
“Greenspan told Congress in October 2008 that he was in a state of “shocked disbelief” and that the “whole intellectual edifice” had “collapsed.” House Committee on Oversight and Government Reform Chairman Henry Waxman (D-Calif.) followed up: “In other words, you found that your view of the world, your ideology, was not right, it was not working.”
“Absolutely, precisely,” Greenspan replied. “You know, that’s precisely the reason I was shocked, because I have been going for 40 years or more with very considerable evidence that it was working exceptionally well.”
Now think a bit. Who is in charge of the Fed today?
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