Oops

Not my bad this time. I caught this statement when it was made back in October, but missed the whole colloquy with Congressman Henry Waxman. In a nutshell, this is why we are is the mess we are in, beyond the financial crunch. The way we explain how the world works, indeed, has serious flaws far beyond those Greenspan used to justify his poor judgment.

REP. HENRY WAXMAN: [T]his is your statement. 'I do have an ideology. My judgment is that free competitive markets are by far the unrivaled way to organize economies. We've tried regulation. None meaningfully worked.'....Do you feel that your ideology pushed you to make decisions that you wish you had not made?

ALAN GREENSPAN: Well, remember that what an ideology is, is a conceptual framework with the way people deal with reality. Everyone has one. You have to — to exist, you need an ideology. The question is whether it is accurate or not. And what I’m saying to you is, yes, I found a flaw. I don’t know how significant or permanent it is, but I’ve been very distressed by that fact.

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.

hubris-outline.jpg

In a world of complexity, any model that assumes that we can ever "know" enough about the system to manage it without rolling the dice should be treated with great skepticism. We need models, for sure, but when anyone becomes hubristic about their confidence in them, as did Greenspan, watch out! To create sustainability, we must relax our belief in all such models--those that describe the environmental world, the social world, the financial world and even those that try to explain individual human behavior. Fortunately we have alternatives to apply while designing sustainability.

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