Greenspan Admits Flaw in His Beliefs: That Markets are Rational and Efficient
The "flaw" in Greenspan's beliefs was that markets are rational and efficient, something some parts of the academic and invesmtent community have promoted for years.
REP. HENRY WAXMAN: You found a flaw in the reality...
ALAN GREENSPAN: Flaw in the model that I perceived is the critical functioning structure that defines how the world works, so to speak.
REP. HENRY WAXMAN: In other words, you found that your view of the world, your ideology, was not right, it was not working?
ALAN GREENSPAN: That is -- precisely. No, that's precisely the reason I was shocked, because I had been going for 40 years or more with very considerable evidence that it was working exceptionally well.
For more information on this subject, I recommend you read an outstanding book by Justin Fox titled "The Myth of the Rational Market: A History of Risk, Reward, and Delusion on Wall Street".
