Greenspan’s “infinite monkey theorem”

Did the free market fail? Well, that seems to be what Alan Greenspan, the former Federal Reserve System chairman, said yesterday to Congress. But before we follow the lead of those in Congress who are using Greenspan’s comments to exert more government control and regulation of our economy, we should consider whether the free market failed.

First, the notion that Greenspan is a “free-marketeer” should be disabused. How could he be given his role with the government as a central planner of the economy? Indeed, in a free-market economy, there would be no such thing as the Federal Reserve, with a handful of people making decisions that affect the entire economy of the United States and, ultimately, the rest of the world.

So while Henry Waxman and other central planners are having a heyday with Greenspan’s comments to condemn capitalism, Pepperdine University Professor Emeritus of Economics George Reisman reminds us that:

the politico-economic system of the United States today is so far removed from laissez-faire capitalism that it is closer to the system of a police state than to laissez-faire capitalism. The ability of the media to ignore all of the massive government interference that exists today and to characterize our present economic system as one of laissez-faire and economic freedom marks it as, if not profoundly dishonest, then as nothing less than delusional.

So, no, Mr. Greenspan, it wasn’t the failure of tens of thousands of people simultaneously making bad decisions in a free-market economy that caused the current financial crisis. That would be the economic equivalent of believing the “infinite monkey theorem” — that a monkey randomly typing for an infinite amount of time could produce the complete works of Shakespeare – caused the problem.Wouldn’t it make far more sense that our financial mess is the result of the poor decisions by the central planners at the Federal Reserve and in Congress?

Of course, I argue that the economic crisis is a failure of government, not deregulation, and Mr. Greenspan deserves plenty of blame-not for his unyielding commitment to the free market, but for his abandoning it as the central-planner-in-chief.

Cross-posted at Capitol Domes.