Alan Greenspan will present a paper at Brookings tomorrow (I didn’t get an invite) on the causes of the financial crisis. According to the New York Times, Greenspan acknowledges that there was a bubble, but says that there would have been no way to identify it or pop it. Instead, he writes,
Unless there is a societal choice to abandon dynamic markets and leverage for some form of central planning, I fear that preventing bubbles will in the end turn out to be infeasible. Assuaging their aftermath seems the best we can hope for.
Isn’t this similar to the argument that Karl Marx made 160 years ago? Or Minsky 60 years ago?
Greenspan’s solution is certainly different, and he doesn’t believe that the contradictions that necessarily cause these bubbles will also cause capitalism to end. However, the diagnosis is distinctly Marxian/Minskyian. It certainly doesn’t seem Hayekian.