Remembering Alan Greenspan: From Rand's Inner Circle to the Maestro of the Fed

Greenspan occupied a singular place in the history of ideas: he was the only member of Ayn Rand’s inner circle to go on and run the world’s most powerful central bank.

Alan Greenspan, who died today at the age of 100 from complications of Parkinson's disease, occupied a singular place in the history of ideas: he was the only member of Ayn Rand's inner circle to go on and run the world's most powerful central bank. That trajectory—from acolyte of laissez-faire capitalism to the chairman who, for nearly two decades, held more sway over the American economy than perhaps anyone besides the President—makes him one of the most consequential, and most complicated, figures Objectivism ever produced.

An Economist in Rand's Orbit

Greenspan met Ayn Rand in the early 1950s, introduced through his first wife, Joan Mitchell, a member of Rand's circle of friends—the group wryly known as "the Collective." He was already a serious, data-driven economist by then, having studied under Arthur Burns at Columbia, but something in Rand's moral case for capitalism clearly took hold. He became a regular at the famous Saturday-night gatherings in Rand's New York apartment, where ideas about reason, individualism, and free markets were argued late into the night.

Rand saw in Greenspan a rigorous mind able to make the technical, empirical case for principles she argued philosophically.

Rand saw in Greenspan a rigorous mind able to make the technical, empirical case for principles she argued philosophically. That respect found lasting expression in 1966, when Greenspan contributed to Rand's anthology Capitalism: The Unknown Ideal—most notably "Gold and Economic Freedom," a tightly argued defense of the gold standard as a bulwark against the deficit spending and monetary debasement that, in his analysis, let welfare states quietly expropriate the wealth of the productive. It remains one of the most cited essays in hard-money economic circles today, and it gave Rand's project something it needed: a credentialed economist making her case in the language of monetary policy, not just ethics.

Having a future Fed chairman trace his formation to Rand's salon did more to legitimize Objectivism in elite circles than almost anything else could have.

This mattered for Objectivism's public standing. In the 1960s and '70s, Rand's ideas were often dismissed by the intellectual establishment as the work of a popular novelist rather than a serious thinker. Having a future Fed chairman—later celebrated across the political spectrum, including by Milton Friedman, who called him the central bank's greatest chairman—trace his formation to Rand's salon did more to legitimize Objectivism in elite circles than almost anything else could have. When Greenspan was sworn in to chair Gerald Ford's Council of Economic Advisers in 1974, with Rand in attendance, it was proof that ideas born at a kitchen table on East 34th Street could reach the highest levels of American policy.

Greenspan never disowned that debt. "Ayn Rand and I remained close until she died in 1982, and I'm grateful for the influence she had on my life. I was intellectually limited until I met her," he wrote in his 2007 memoir, The Age of Turbulence: Adventures in a New World. It is a remarkable admission from a man who, by then, had spent nearly two decades as the most powerful unelected official in Washington—and it speaks to just how formative those Saturday nights on East 34th Street really were.

The Maestro

Reagan nominated Greenspan to chair the Federal Reserve in 1987. He served five terms under four presidents, becoming, as NPR put it today, "a maestro of monetary policy"—steadying markets after the 1987 crash, the Asian and Russian financial crises, and September 11, while presiding over one of the longest economic expansions in American history. "The Greenspan put" entered the popular lexicon, a measure of how closely Wall Street watched his every move. He became the most famous economist of his era, treated with near-reverence by both parties.

The Drift

The hand that once made the moral case against central-bank meddling spent eighteen years meddling.

It is precisely that reverence, though, that Objectivists have reason to view with some unease. The young economist who wrote that fiat currency enabled the "hidden confiscation of wealth" by the state became, over nearly two decades at the Fed, the most powerful steward of fiat currency in the world—setting interest rates, managing the money supply, and intervening reflexively whenever markets wobbled. The hand that once made the moral case against central-bank meddling spent eighteen years meddling, more deftly and more consequentially than any predecessor.

It is fair to ask whether this drift was less a renunciation of principle than a seduction by power, fame, and Washington's gravitational pull. Greenspan became a kind of celebrity statesman—lionized by Congress, courted by presidents, married to a chief network correspondent—and years inside that establishment surely left their mark. The self-confidence that made him an effective communicator of free-market ideas in his thirties may have curdled, by his seventies, into something closer to hubris: a conviction that he, more than markets themselves, could manage the economy's signals well enough to keep calamity at bay.

He came to acknowledge as much. In his 2007 memoir and later interviews, Greenspan admitted he had made "a mistake" in assuming banks could be trusted to regulate themselves—a concession that his deregulatory faith carried real costs when the 2008 financial crisis arrived, two years after he left the Fed. Critics, not without justification, trace some of that crisis's roots to the easy-money policies and light-touch supervision of his final years in office.

A Complicated Legacy, Honestly Told

Atlas Society readers should resist two tempting oversimplifications: dismissing Greenspan as a sellout the moment he took power, or treating his later policies as some hidden vindication of statism. Neither is true. He gave laissez-faire capitalism one of its most articulate technical defenses of the twentieth century—then spent the back half of his career practicing something considerably less pure, not simply because his Fed mandate forced his hand, but because, like so many brilliant men handed enormous power, he came to trust his own judgment over the impersonal discipline of free markets and sound money he had once so eloquently defended.

Greenspan's life reminds us that ideas are not self-enforcing, even in the minds of those who articulate them best.

That tension, between the philosophy of reason and individual rights and the human temptations of institutional power, is itself worth taking seriously. Greenspan's life reminds us that ideas are not self-enforcing, even in the minds of those who articulate them best. We remember him today, on balance, with respect: for the rigor he brought to Rand's case for capitalism in his youth, for the steady hand he brought to genuine crises, and for the honesty he showed, late in life, in admitting where he had gotten it wrong.