How Alan Greenspan Learned To Stop Worrying and Love the State
by Roderick T. Long
by Roderick T. Long
Alan Greenspan started off his political career, under Ayn Rand's influence, as a fairly consistent Austro-libertarian, penning articles defending the gold standard and condemning antitrust law. Nowadays, of course, while he still calls himself a libertarian, few would accuse him of excessive purity in that regard. There's been much speculation as to the when and why of his transition. For what it's worth, in Greenspan's recent memoir The Age of Turbulence (which I've looked through so you don't have to — though I haven't read the whole thing), we hear the story in his own words.
There's not much libertarian meat in the book; the only libertarian or libertarian-ish figures to appear in the index (apart from a brief — and mistaken — reference to Herbert Spencer (pp. 278—79) as a follower of Charles Darwin) are Milton Friedman and Ayn Rand. (Well, we also learn that (p. 323) former Putin advisor Andrei Illarionov is an Ayn Rand fan.) Greenspan's favourite economist is clearly Friedman, on whom he lavishes praise throughout; his favourite political figures, likewise adulated, are Reagan and Thatcher. Despite his early Austrianism, there's no reference in the index to Mises, Hayek, or any other Austrian economist. (Okay, Benjamin Anderson shows up in a footnote; and Fritz Machlup is mentioned on p. 497 although he's not in the index.) Greenspan refers (pp. 97—98) to his own early libertarian essay on antitrust, written for The Objectivist — but only in connection with his using it as material for winning Andrea Mitchell's affections. (I am not making this up!)
Greenspan's libertarian odyssey begins with his conversion to Ayn Rand's Objectivism. When he first encountered Rand, he was an adherent of logical positivism, which he describes this way:
Pioneered by Ludwig Wittgenstein, it is a school of thought whose main tenet is that knowledge can only be gained from facts and numbers — it heavily emphasizes rigorous proof. There are no moral absolutes: values and ethics and the way people behave are reflections of culture and are not subject to logic. (p. 39)
The reference to Wittgenstein is an error; the positivists were inspired by a certain interpretation of Wittgenstein's writings, but it was a deeply mistaken interpretation that Wittgenstein himself never endorsed. (And who doesn't think that knowledge can only be gained from facts?) But never mind. In any case, his introduction to Rand and her salon soon chipped away at his enthusiasm for positivism. The following story is a familiar one in Randian circles, but this is (I believe) the first time we've heard it from Greenspan's own perspective:
After listening for a few evenings, I showed my logical-positivist colors. I don't recall the topic being discussed, but something prompted me to postulate that there are no moral absolutes. Ayn Rand pounced. How can that be?
Because to be truly rational, you can't hold a conviction without significant empirical evidence,
How can that be? she asked again. Don't you exist?
I ... can't be sure, I admitted.
Would you be willing to say you don't exist?
And by the way, who is making that argument?
Maybe you had to be there — or, more to the point, maybe you had to be a twenty-six-year-old math junkie — but this exchange really shook me. I saw she was quite effectively demonstrating the self-contradictory nature of my position. ... It dawned on me that a lot of what I'd decided was true was probably just plain wrong. Of course, I was too stubborn and embarrassed to concede immediately; instead, I clammed up.
This exchange suggests that the young Greenspan was not especially well-versed in the logical positivism he espoused, since the positivists themselves did cover this sort of objection in their writings and could have provided, if not unassailable answers, at least better than no answer.
Rand came away from that evening with a nickname for me. She dubbed me the Undertaker, partly because my manner was so serious and partly because I always wore a dark suit and tie. Over the next few weeks, I later learned, she would ask people, Well, has the Undertaker decided he exists yet? (p. 41)
If I know anything about Rand, the nickname was probably first and foremost a reference to the content of Greenspan's philosophical views — specifically, Greenspan's uncertainty as to whether he was alive. In any case, Rand soon convinced Greenspan of his own existence and much else:
Ayn Rand became a stabilizing force in my life. … I was intellectually limited until I met her. All of my work had been empirical and numbers-oriented, never values-oriented. ... My logical positivism had discounted history and literature .... [Actually the logical positivists didn't discount history, exactly; they simply thought it could be reconstructed on the lines of empirical natural science. — RTL.] Rand persuaded me to look at human beings, their values, how they work, what they do and why they do it, and how they think and why they think. This broadened my horizons far beyond the models of economics I'd learned. I began to study how societies form and how cultures behave, and to realize that economics and forecasting depend on such knowledge — different cultures grow and create material wealth in profoundly different ways. All of this started for me with Ayn Rand. She introduced me to a vast realm from which I'd shut myself off. (pp. 51—53)
Greenspan's conversion to Objectivism included its radically libertarian economic and political content; but Greenspan soon began to have doubts:
I engaged in the all-night debates and wrote spirited commentary for her newsletter with the fervor of a young acolyte .... It was only as contradictions inherent in my new notions began to emerge that the fervor receded.
One contradiction I found particularly enlightening. According to objectivist [sic] precepts, taxation was immoral because it allowed for government appropriation of private property by force. Yet if taxation was wrong, how could you reliably finance the essential functions of government, including the protection of individuals' rights through police power? The Randian answer, that those who rationally saw the need for government would contribute voluntarily, was inadequate. People have free will; suppose they refused? (p. 52)
This passage is doubly puzzling. First, the Randian answer to government funding is not to rely solely on voluntary contributions; as Rand explains in The Virtue of Selfishness, her solution is to have the government coercively monopolize the field of contract enforcement (ch. 14) and charge monopoly rents for this service (ch. 15). Has Greenspan forgotten the actual position he's criticizing? Second, even if reliance on voluntary contributions were Rand's position, Greenspan's free will objection would be a poor response to it. After all, the administrators and functionaries of government also have free will and thus cannot be guaranteed to behave in any particular way either. (If Greenspan instead wanted to maximize the likelihood that people will act in such a way as to protect rights, he might have considered opening the field of rights protection to economic competition rather than consigning it to the perverse incentival and informational constraints of a monopoly. But free-market anarchism is no path for the politically ambitious.)
I still found the broader philosophy of unfettered market competition compelling, as I do to this day, but I reluctantly began to realize that if there were qualifications to my intellectual edifice, I couldn't argue that others should readily accept it. By the time I joined Richard Nixon's campaign for the presidency in 1968, I had long since decided to engage in efforts to advance free-market capitalism as an insider, rather than as a critical pamphleteer. When I agreed to accept the nomination as chairman of the president's Council of Economic Advisor, I knew I would have to pledge to uphold not only the Constitution but also the laws of the land, many of which I thought were wrong. The existence of a democratic society governed by the rule of law implies a lack of unanimity on almost every aspect of the public agenda. Compromise on public issues is the price of civilization, not an abrogation of principle. (p. 52)
Greenspan offers no clue as to whether there are any exceptions to this dictum. Should one also compromise on such issues as, say, slavery or genocide? Would compromise there too be the price of civilization? If not, what are the criteria for determining which issues are open to compromise and which are not? When Greenspan abandoned his early Objectivism, did he also abandon an interest in finding answers to such questions? We're not told.
Later in the book, however, Greenspan does offer some further reasons for rejecting libertarian purity. He asks: Are all property rights inalienable, or must they conform to the reality that conditions them? (p. 496) Greenspan seems not to know what the word inalienable means; it refers to a right that cannot be surrendered or transferred. (For example, the dispute over the legitimacy of selling oneself into slavery turns on whether self-ownership is alienable or inalienable.) If all property rights were inalienable, trade of any kind would be impermissible!
What Greenspan is actually asking is whether all property rights are absolute or inviolable; and he offers the case of intellectual property as a reason for thinking they are not. On the one hand, Greenspan argues, libertarianism seems to support the initial conclusion that if somebody creates an idea, he or she has the right of ownership. But on the other hand:
It is at least conceivable that if the right to exclusive use of ideas cumulated through enough generations, some far future newly born generation would find all ideas necessary for survival already legally spoken for, and off-limits without permission of those holding the rights to the ideas. Clearly the protection of one person's right cannot be at the expense of another's right to life (as it would be in such an instance), or the magnificent edifice of individual rights would harbor an internal contradiction. (p. 496)
Hence Greenspan concludes that we need to strike a different balance and apply a pragmatic standard, supporting patent and copyright restrictions that are sufficiently broad to encourage innovation but not so broad as to shut down follow-on innovations. (p. 497)
Here again Greenspan's argument is dubious. First, Greenspan seems unaware of the work done by Stephan Kinsella and others to show that intellectual property rights cannot be justified on libertarian principles. If intellectual property is not a legitimate form of property, then the purported contradiction in the magnificent edifice of individual rights is in no danger of arising in the first place.
Second, if intellectual property rights were genuine rights with the implications that Greenspan describes, then they presumably would not conflict with the right to life — since on a libertarian understanding, the right to life is a negative right not to be killed, not a positive right to be provided with the materials needed for life. So in this case too there would be no contradiction.
Greenspan's argument could be extended equally well — or equally badly (take your pick) — to the case of property in land: it is likewise at least conceivable that if the right to exclusive use of land cumulated through enough generations, some far future newly born generation would find all land necessary for survival already legally spoken for, and off-limits without permission of those holding the rights to the land. (Indeed Herbert Spencer offered essentially this argument against the legitimacy of private ownership of land; see my reply here.) So if property in land is inviolable despite this inconvenient consequence, why shouldn't intellectual property, if legitimate at all, be so as well? Or if Greenspan's argument instead implies that we should accept pragmatic limitations on intellectual property, why not equally so on landed property? Yet Greenspan takes his argument to show that intellectual property is importantly different from physical property. (p. 495)
If this is a sample of the compelling argumentation that convinced Greenspan to abandon libertarian purity, Greenspan's critics can be forgiven for wondering whether other inducements were involved as well.
April 1, 2008
Roderick T. Long [send him mail] is Associate Professor of Philosophy at Auburn University; Editor of the Journal of Libertarian Studies; co-editor of the Journal of Ayn Rand Studies; President of the Molinari Institute; Senior Scholar of the Ludwig von Mises Institute; author of Reason and Value: Aristotle versus Rand; and co-editor of Anarchism/Minarchism: Is a Government Part of a Free Country? He received his Ph.D. from Cornell in 1992, and maintains the website Praxeology.net, as well as the web journal Austro-Athenian Empire.
Copyright © 2008 Roderick T. Long