I should correct myself: in addition to not wanting the WS bubble to pop, Greenspan seems to have been taken over by the "new economy" propaganda during the late 1990s, so he assumed that the rise in labor productivity growth then was a long-lasting change (something that might still turn out to be true) so that his estimates of the Non-Accelerating Inflation Rate of Unemployment (the so-called natural rate) fell.
BTW, this interpretation of rising productivity growth rates allowing a falling NAIRU only works if we assume that wages don't speed up their rise, too. Of course, the growing prevalence of neo-liberal policies of the last 30 years (including Greenspan's contributions) ensured that assumption worked.
------------------------
Jim Devine [EMAIL PROTECTED] & http://bellarmine.lmu.edu/~jdevine
> -----Original Message-----
> From: Doug Henwood [mailto:[EMAIL PROTECTED]]
> Sent: Wednesday, June 11, 2003 11:53 AM
> To: [EMAIL PROTECTED]
> Subject: Re: [PEN-L] Stiglitz on central banks
>
>
> Devine, James wrote:
>
> >there's another story here, one that I believe that pen-l alumnus
> >Brad deLong tells, i.e., that Alan Greenspan was willing to take the
> >risk of lower unemployment rates (perhaps because he didn't want to
> >pop the growing Wall Street bubble after 1995 or so). But Stiglitz
> >gives credit to his former employer, the Clinton CEA -- while saying
> >that the Fed's model was wrong.
> >
> >Which view is accurate? To my mind, Stiglitz seems wrong, since
> >fiscal policy (the province of the Clinton administration) was
> >_contractionary_ during the late 1990s and monetary policy
> >definitely let the boom and bubble occur.
>
> Further, Greenspan started worrying about deflation early on, and
> resisted pressure from Wall Street and his colleagues to tighten
> around 1996.
>
> Another odd thing about Stiggy's argument is that he implicitly buys
> the crowding out argument, which liberal Keynesians aren't supposed
> to do.
>
> Doug
>
