Thoughts on the Maestro.

ALAN GREENSPAN was sworn in as Chairman of the Board of Governors of the Federal Reserve System almost exactly 18 years ago. At the time, the Reagan administration was being rocked by the Iran-contra scandal. The Berlin Wall was standing tall while, in the Soviet Union, Mikhail Gorbachev had just presented proposals for perestroika. The stock market had not crashed since 1929 and, probably by coincidence, Prozac had just been released on the market. The New York Mets, having won the 1986 World Series, were the reigning champions of major league baseball. A lot can change in 18 years.

Turning to the narrower world of monetary policy, central banks in 1987 still doted on money growth rates and spoke in tongues--when indeed they spoke at all, which was not often....

... [W]ithin the domain of monetary policy, Greenspan has been central to just about everything that has transpired in the practical world since 1987 and to some of the major developments in the academic world as well .... [T]he Greenspan era ... started in earnest with a frightening one-day crash of the stock market in October 1987, and included wars in Iraq in both 1990 and 2003, a rolling worldwide financial crisis in 1997-1998, the biggest financial bubble in history, an amazing turnaround in productivity growth after 1995, and a deflation scare in 2003. It is now culminating with Greenspan's fourth attempt at a soft landing....

... While there are some negatives in the record, when the score is toted up, we think he has a legitimate claim to being the greatest central banker who ever lived. His performance as chairman of the Fed has been impressive, encompassing, and overwhelmingly beneficial--to the nation, to the institution, and to the practice of monetary policy.

--ALAN S. BLINDER and RICARDO REIS 

Princeton University

IN ITS 92-year history, the Federal Reserve has had 12 chairmen, 7 in the modern era. In my judgment Alan

Greenspan stands in the front rank. ... Per capita consumption in constant dollars increased 44 percent during the first 17 years of his chairmanship, and 27 million additional workers found employment.

--ALLAN H. MELTZER

Carnegie Mellon University 

UNDER ALAN GREENSPAN'S stewardship, the U.S. has achieved remarkably low levels of inflation and inflation volatility, despite the lack of real reference points. We do not need to know the GDP gap, the unemployment gap, or the neutral real interest rate, to keep the price level near constancy.

--ROBERT E. HALL

Stanford University

I HAD the privilege of participating with Alan in all meetings of the G7 Ministers and Governors over the last 18 years.... I can say that ... Alan's expositions in this intimate, restricted format are incredibly sharp, profound and visionary. I per sonally share fully, in particular, the judgement...on the lucidity of Alan as regards the early diagnosis of the productivity jump in the US economy.

--JEAN-CLAUDE TRICHET

President, European Central Bank 

... I AGREE with [the] overall evaluation of Alan Greenspan that "when the score is toted up, we think he has a legitimate claim to be the greatest central banker who ever lived."

... FOMC monetary policy decisions under Alan Greenspan's leadership have been guided by a clear set of monetary policy principles. Good judgment and leadership have been essential to implementing these principles, but the principles are by no means a secret. These principles, along with their judicious implementation, are a major reason for the extraordinary economic performance during the Greenspan era.

--JOHN B. TAYLOR

Stanford University

THE LEGACY of the Greenspan era may be, counter-intuitively, that policymakers are less prepared, not more so, to deal with the end of our imbalances....

The virtues of the Greenspan Federal Reserve are clear: Rapid growth with few recessions or recessionettes, stable and reduced price inflation, and low interest rates.... To at least some degree the very deft handling on our side of the policymaking arena has taken policymakers abroad off the hook to engage their own domestic demand management and structural reforms.

--CATHERINE L. MANN

Institute for International Economics

...[T]HE FED should have tightened faster to prevent the current account deficit from exploding and to reduce the risk of a dollar collapse.

--BARRY EICHENGREEN

University of California, Berkeley 

[THESE] ARE the three lessons that I have learnt from Alan: (i) a recognition that economics is not a set of doctrines but a way of thinking; (ii) the importance of using qualitative and quantitative information from a range of sources; (iii) there are a small number of fundamental objectives that are crucial and which we can judge by the Greenspan yardstick of whether we have freed businesses and households from the burden of expending resources to deal with unnecessary policy volatility.

Alan's departure from the central banking scene will deprive us of a source of wisdom, inspiration and leadership. To be sure, Alan's words, whether spoken or written, will surely still reach us from the sidelines. To use a tennis analogy, I see Alan as the central banking equivalent of the non-playing captain of a Davis Cup team, encouraging the younger and less talented members, and stressing the importance of footwork, timing and getting into position early.

--MERVYN A. KING

Governor, Bank of England 

...[H]E HAS also set the standard of excellence for public speeches. His gift is the ability to articulate deep insight on the economic issues of our time in a way that is both clear and accessible, yet recognizes the limits of our knowledge....

The emphasis in the Greenspan era on communication as an integral part of monetary policy has achieved a much smoother ride for the United States and, indeed, for the global economy.

--TIFF MACKLEM

Deputy Governor, Bank of Canada 

ONE OF the most notable changes at the Federal Reserve during the tenure of Alan Greenspan as Chairman of the Board of Governors has been a steady increase in the FOMC's willingness to talk openly about the policy decisions that it has made and those it is likely to make in the future. Before the 1990s, central banking was shrouded in mystery ...

Things have changed rapidly over the past 15 years....

--MICHAEL WOODFORD

Columbia University

CHAIRMAN GREENSPAN has welcomed the ability of new technologies in financial markets to reduce transactions costs, to allow the creation of new instruments that enable risk and return to be divided and priced to better meet the needs of borrowers and lenders, to permit previously illiquid obligations to be securitized and traded, and to make obsolete previous divisions among types of financial intermediaries and across the geographical regions in which they operate. At the intersection of market developments and monetary policy, he has led the Federal Reserve's efforts to understand the implications of changing financial technology, such as the growing ease of housing equity extraction, and to use the newly available information about market expectations and the price of risk embodied in market prices.

--DONALD L. KOHN

Governor, Board of Governors of the Federal Reserve System

Excerpts from "The Greenspan Era: Lessons for the Future," a symposium sponsored by the Federal Reserve Bank of Kansas City, August 25-27, 2005, in Jackson Hole, Wyoming.