GREENSPAN WINS DYNAMITE PRIZE IN ECONOMICS

The on-line journal Real-World Economics Review Blog recently had a contest to see who their readers believed was the economist most responsible for blowing up the world economy.

Here are the top three vote getters for the Dynamite Prize in Economics, with a brief professional "bio" explaining their rank.

Alan Greenspan: As the former chair of the Federal Reserve (1987-2006), Alan Greenspan won because of how his fairytopian market views helped ruin our nation's economy. His economic dream world ran so deep that he believed markets didn't need regulation because they're so efficient that even corruption and stupidity are eventually weeded out. People, after all, can be expected to do the right thing when money and profits are staring them in the face. He was so convinced about his Ayn Rand drenched ideology that he consistently lowered interest rates, and expanded the money supply, foolishly believing that people who get money nearly for free will act rationally.

For believing that people are angels in a market setting, Greenspan's award is well deserved.

Milton Friedman: Encouraged by the brilliance of his own writings (he was a good writer), Friedman managed to convince himself that the Federal Reserve was to blame for the Great Depression. Friedman pushed his delusions about markets - and evil government - to such a degree that he wrote the policy paper that led the U.S. out of the draft and into an all volunteer military. To get the results he needed - which focused on market efficiency rather than national security - he deliberately ignored the research methods he was asked by Congress to use in the policy paper. Because of Milton Friedman we now have: (1) a Federal Reserve that believes it's so important that it can stonewall congress, and; (2) a military that allows U.S. presidents to ignore the will of the people (a draft to fight reckless wars would get our attention), and increasingly depends on private mercenary companies, like Blackwater.

After considering how his academic career influenced public policy, Friedman probably should have received a Life Time Achievement Award.

Larry Summers: Former Harvard economist Larry Summers was at the center of the good 'ol boy wolf pack that went after Brooksley Born. Who's Brooksley Born? In her post as director of the Commodity Futures Trading Commission (CFTC), Born warned Washington that if we did nothing to rein in derivative trading that we were looking at a market collapse ... in 1997! Summers - along with Robert Rubin (Treasury), Alan Greenspan (the Fed), and Arthur Levitt (SEC) - thought it was better to bury Born politically. Kudos.

Proving that his Born Stupidity was not a one time fluke, in 1999 Summers also gave intellectual weight to the idea of dispensing with the Glass-Steagall Act (1933). The Glass-Steagall Act separated commercial banks, investment banks, and insurance companies after it was discovered that the financial sector had worked collectively to speculate and defraud customers before 1929. For reasons not yet explained, Summers believed that ignoring history and bringing banks, brokers, and insurance companies together again was a good idea.

Don't feel bad for Larry Summers if you think he should have won this time around. He can still prevail. For my money, as a member of President Obama's "don't-push-Wall-Street-too-hard" economic team, Summers has a very good chance of winning the Dynamite Prize in Economics in the future.

While I would have liked to see Arthur Laffer, the economic genius behind supply-side economics, as one of the nominees, there's no doubt that the top vote getters deserve their place in Dynamite lore.

- Mark