Remembering Alan Greenspan

Research evidence excerpt

Remembering Alan Greenspan

forecasts. Instead, he searched for revealing relationships in data and drew

heavily on information gathered from his extensive network of business leaders

and industry contacts.

Over the years I occasionally worked on speeches for him, mostly in an editorial

capacity, since he inevitably rewrote drafts into precisely what he wanted to say.

“Irrational Exuberance”

One memorable episode involved the now-famous phrase “irrational

exuberance” in a speech prepared for the American Enterprise Institute in

December 1996. Several staff members, myself included, were skeptical.

Greenspan insisted. History vindicated him.

Years later I asked him the secret of his remarkable longevity and productivity.

His answer surprised me: soaking in a hot tub. The same ritual that, as he later

recalled, had inspired the concept of “irrational exuberance” sustained him well

into his tenth decade.

The Productivity Revolution

The 1990s were, in many ways, a magical time for the Federal Reserve.

Greenspan earned his reputation as the “Maestro”—the title Bob Woodward

gave him in his 2000 book—in large part because of his extraordinary network of

contacts throughout business and industry.

By the middle of the decade, many policymakers worried that growth was

running beyond the economy’s capacity and that inflation pressures were

building. Greenspan disagreed. He became convinced that information

technology and the computerization of business processes were producing a

genuine acceleration in productivity growth, allowing the economy to sustain

faster expansion without inflation.

Greenspan’s recognition of the productivity surge before most others

demonstrated his ability to identify anomalies that did not fit conventional