It does 'appear' that Greenspan's self--or perhaps under-- regulation failed us in a big way. But regulation is expensive and can weigh down a company as anyone familiar with Sarbanes-Oxley can attest. So how do you get companies to play fair without needlessly hampering our productivity? Do you change some entities to operate as a government or psuedo-government entity, NGO, GSE(like Fannie Mae), 501c? If so, which ones? Or how and what do you regulate?
In The Age of Turbulence, which Greenspan wrote before the crisis, he elaborates on the philosophies (he was a logical-positivist turned objectivist by Ayn Rand) which help guide his belief system for interpreting the data and issuing policies. Greenspan, if not heavily influenced by, was at least somewhat congruent with the work of libertarian economist Milton Friedman (see him on Donahue), and Friedman's rep has taken a hit lately too. But Milton Friedman disagreed with Greenspan on one key aspect of monetary policy-- that the money supply should be tightly controlled (see article). Sadly, he recanted this belief just before he died. If he were alive today, he might recant that recant.
Greenspan answers questions (note the contentious title)
In the Donahue interview below, Friedman discusses his hands-off approach to economics. Note that he says there is no case for the government to mandate air bags in cars. I don't disagree with this per se, but there is a case actually-- it is when you injure yourself such that you have to be put on a ventilator at someone else's expense (called a collection action problem). This happened enough in the 80s, 90s, and 00s (though mostly due to not wearing a motorcycle helmet) that it has caused some noticable medical expenses for the public.
Where to draw the line with regulation in the free markets has always been a main source of contention with Friedman's theories, and the House of Cards video (see Environs) examines the recent problems that have arisen from lax regulation. It appears, to many, that the theory that individuals pursuing their own self-interests leads to prosperity for all may need to be refined a little. I've often wondered if we should turn to the field of game theory for some answers to this type of question as the unbridled pursuit of self-interest does have some fallout.
On that note, Napoleon Hill, of Think and Grow Rich (1937), wrote: "The path of least resistance makes all rivers, and some men, crooked." Napoleon (Hill not Boneparte) was from my neck of the woods, and from the same area my orphaned grandfather grew up in tiny houses, sometimes with no roof, and no guardians-- only his siblings. As such, Hill's highly abstract question "In what do I truly believe?" has always had a very tangible feel to me; I guess because images of my father's family and culture so easily come to mind. That place is quite a long way from Wall Street in 2009.
So what is the point of all this economy stuff? Learn how it works and then don't get caught up in it. That path of least resistance is crowded. If you feel an exuberant greed and passion for money brewing inside of you, I recommend avoiding entrepreneurial endeavors unless you are willing to wait potentially a long time for your money. There are easier ways to make money. It's far simpler, and I believe more natural and fulfilling, for an entrepreneur to pursue goals that he believes in rather than ideas that he thinks will make money. Of course money is good, but as Warren Buffet said: "It's kind of like saving sex up for your old age. At some point you've just got to do what you enjoy."
