Opining about what governments should look for in a central banker, 19th century economics writer Walter Bagehot noted that, “A very high pay of prestige is almost always very dangerous. It causes the post to be desired by vain men, by lazy men, by men of rank.” Bagehot said, “such men are dangerous.”

Alan Greenspan was appointed Fed Chairman by President Reagan in 1987, and while he wasn’t a lazy man by any accounts, he was a man of rank very eager to take on the role of the most prestigious central banker in the world. Though power did not corrupt his mostly successful tenure as Fed chief, Greenspan’s autobiography, The Age of Turbulence, suggests that the majesty of the post in many ways distorted the actions of a man who points to Ayn Rand, Adam Smith and Joseph Schumpeter as three of his greatest intellectual influences.

Rand of course believed in the wisdom of the individual to act in his or her self-interest in ways that ultimately improved the lot of everyone, while Smith (in Greenspan’s words) believed that individuals “trading freely with one another following their own self-interest leads to a growing, stable economy.” Greenspan goes on to write that market perfection results from people “free to act in their self-interest, unencumbered by external shocks or economic policy.” What’s striking then is how Greenspan often strayed from this simple logic given his desire to tame economic growth along with markets he deemed frothy. If they’d been around to witness Greenspan’s time at the Fed, would Rand, Smith and Schumpeter have been fans of his work? Maybe not.

From the book’s introduction and well beyond, Greenspan frequently errs on the side of limiting individual economic activity; in particular arguing post-9/11 that excessive tax cuts “would overstimulate the economy and cause interest rates to rise.” The latter view, that growth is inflationary, and as such should be managed from Washington, is a major theme throughout.

Upon taking over in 1987, Greenspan felt the need to “raise rates soon” based on reports from other Fed presidents who said they were “seeing good growth, high optimism, and full employment—all reasons to be leery of inflation.” Apparently more oriented in Phillips Curve thinking than was assumed at the time, Greenspan justifies rate increases with his view that, “the long Reagan-era boom had maxed out: factories were full, and joblessness was at its lowest level in eight years.”

For a self-professed free trader and free marketer, Greenspan’s words seem strange and contradictory, and worse, speak to someone very much taken in by the prestige of his office such that he feels justified to opine on, and at times manage, the infinite decisions and inputs that were the marketplace. At various points in the book he writes of the happy process of globalization that leads to greater and greater work specialization through access to the worldwide labor force, yet in attempting to slow the Reagan economy, he reverted to thinking suggesting that the U.S. was isolated in such a way that perceived labor shortages stateside would somehow be inflationary. That inflation is always and everywhere a monetary phenomenon is never mentioned, because had it been, the folly of his actions would be more apparent. If it has any effect, growth serves to soak up excess liquidity, so that efforts to bring about “soft” economic landings if anything exacerbate real inflationary pressures.

Moving to the Clinton years, a large factor in Greenspan’s seeking higher rates in 1994 had to do with what he deems the Fed’s desire to be pre-emptive “before the economy had a chance to seriously overheat.” And while Clinton Treasury Secretary Robert Rubin had made plain to him that a federal official should never talk about the stock market in public, Greenspan aggregated to himself the role of stock-market commentator too. The most prominent instance of this is a speech he planned in the bathtub one morning which asked, “how do we know when irrational exuberance has unduly escalated asset values?”

If even the most skilled investors fail at times to understand markets, how could Greenspan have assumed he was somehow different? Worse, given Greenspan’s brilliant articulation of the Schumpeterian view that rapid economic change results in positive, efficiency-enhancing creative destruction, what purpose did it serve to distort this process with “soft landing” policies that by definition would have slowed the aforementioned change? In short, even if one accepted the flawed logic suggesting labor shortages can cause inflation, wouldn’t it be best to let the markets solve this problem through innovation (the ATM, the Internet, foreign outsourcing to name three) rather than with ham-handed governmental policies meant to put people out of work?

Greenspan points to the happy fall of communism and the subsequent addition of hundreds of millions of workers into the worldwide labor pool as a helpful factor when it came to keeping inflationary pressures down during most of his tenure. He adds that future central bankers won’t be so lucky once the world digests the formerly unfree workforce additions from the former Soviet Union, China and India.

But even there he violates the basic classical principle that supply is demand. While we’re very definitely the lucky beneficiaries of cheap goods from overseas, the reality is that there never can be a broad glut or dearth of goods such that the general price level moves at all. Workers offering up new goods will by definition be demanding goods (the price level thus remaining unchanged), and to the extent that workers save the gains from their output, those savings will merely fund the creation of new companies who will employ workers demanding goods from the world supply. In choosing to ignore the truth that all inflation/disinflation is monetary in nature, Greenspan further misrepresents what inflation actually is.

When it came to taxes and government revenues, Greenspan’s soul mate was George W. Bush’s first Treasury Secretary, Paul O’Neill. He and O’Neill agreed that when it came to tax cuts, there should be “tripwires” in case revenues fell substantially. Though he softly acknowledged the incentive/revenue effect of tax cuts, Greenspan fails to note that if tax rates are uncertain, there would be a chilling effect on economic actors such that the latter would be more reluctant to engage in profitable activity given the knowledge that rates could change at any time. So in a sense, the tripwires that Greenspan advocated would have been self-fulfilling for the certainty that they would have stimulated less in the way of production.

Greenspan’s assertion that “a sound budget will bring long-term rates down” made him very much at home with the “Rubinomics” crowd of the Clinton Administration, and sure enough, he says he “had an unusually fruitful and harmonious working relationship” with both Rubin and his successor, Lawrence Summers. Impressive company for sure, though it should be remembered that long-term rates actually fell amidst rising deficits in the ‘80s, that the 30-year Treasury was yielding 5.8% when the Clinton tax increases passed in ’93 versus an 8% yield by 1994, and that long rates rose during the surplus years only to fall again with the return to deficit spending in the new millennium.

Commenting on the Asian currency crisis of the late ‘90s, Greenspan reduces it to an inevitable event that came about when “shrewd market players who didn’t believe in the tooth fairy realized that the developing countries could maintain the fixed-exchange rate regime only so long.” No mention was made that his failure to accommodate the 1997 cut in the capital gains rate led to a rising dollar such that the aforementioned fixed exchange rates were made tenuous by his very own policies.

In much the same way Greenspan glosses over inflationary mistakes made at the Federal Reserve while discussing the rising oil price over the last few years. Foreign demand is once again blamed, while the truth that oil is up 190% in dollars since 2001 (versus 85% in euros) is never mentioned. Greenspan bemoans the lack of an inventory cushion and lagging investment on the part of oil producers as the other main reasons for expensive oil today, but never mentions how the gyrating dollar has made large petroleum inventories and heavy capital investment things of the past.

Seeking to explain the often secretive nature of FOMC meetings, Greenspan says that if the discussions were made public, the meetings would have become “a series of bland, written presentations.” Hard to argue with, but then maintaining a stable dollar should be a very bland process, which begs the question of why the FOMC would need to meet at all to maintain dollar-price stability. In Greenspan’s defense he merely inherited a position that had gotten too powerful, but given his free-market leanings, it would have been nice to have learned that once in power, he sought to greatly reduce the Fed’s mission. Sadly, he did not.

So while many will be disappointed to learn the extent to which Greenspan tried to manage the economy, worked against tax cuts, and generally glossed over mistakes of his own making, the Age of Turbulence is still very much a worthwhile read. Greenspan’s writing is very lively and insightful on a variety of subjects.

A strong free trader, tariffs in his view lead to the unhappy “reversal of the international division of labor.” Having lived a long time, Greenspan’s application of Schumpeter’s vision of creative destruction to manufacturing, communications and Soviet-era tractors was positively riveting.

Addressing our current-account deficit, Greenspan says he would place worries over it “far down the list.” Instead, he attributes its rise to a reduced “home bias” when it comes to foreign investment, along with the increasing worldwide specialization of labor that has enriched workers such that they have money to invest. Greenspan makes plain that the world’s “current account balance is zero,” and while U.S. companies may more and more be the recipients of foreign sources of capital, this affects “international balance-of-payments bookkeeping but arguably not economic stress.”

For gold-standard advocates, though, Greenspan suggests there is “no likelihood of its return” due to constant political pressures for cheap money, he acknowledges that he has “always harbored a nostalgia for the gold standard’s inherent price stability.” He also points out that “the average inflation rate under gold and earlier commodity standards was essentially zero.”

In a sense, his laudatory comments about gold are what made the Age of Turbulence most disappointing. While the book would suggest he targeted the economy to the detriment of the dollar throughout his tenure, Greenspan fingered the dollar price of gold as a major determinant in his conduct of monetary policy in a 1994 congressional statement, and from 1989 to 1997, gold fluctuated in a relatively tight range of $320-$400. It’s been said that Greenspan had us on an implicit gold standard during the ‘90s; and measured by the stock market, those were great economic times.

Whether or not he targeted a stable dollar, Greenspan’s reputation rose in such a way that he alone had the capital to tell Congress that the Fed should move in a new direction of not targeting the economy, and instead seeking a stable dollar price. He didn’t, and to some degree this could be explained as the certain result of his having morphed from sober central banker to “Maestro.” Maestros wouldn’t let “barbarous relics” be their guide, and partially to his discredit, the S&P 500 fell 13% from the time Bob Woodward’s book was released to Greenspan’s departure from the Fed. From the late ‘90s to 2006 when he left, the dollar/gold price became highly volatile as Greenspan tried to manage the economy while placing much less emphasis on the dollar’s singular value.

In a way, the prestige that accrued to Greenspan as a result of his previously good works put the future of central banking in a precarious position. Leaving no template for future Fed chairmen to follow other than engaging in the impossible task of guiding the economy, Greenspan’s account elevates the Fed Chairman’s prosaic role to one of prestige such that the vainer among us will surely aspire to the post in the future. As Bagehot noted, such men are dangerous.