“I have found a flaw."

M r. Sperandeo, my high school economics professor, was fond of saying, "Though I do not have a Doctorate of Philosophy in Economics, I can tell you for certain that Alan Greenspan is the single greatest economic policy decision maker this country has ever had." At that time, he seemed right. The United States and the world had seen one of the greatest economics booms in the history of the modern era and Alan Greenspan was seen by many as the heroic captain of the ship. On the eve of his unprecedented fifth appointment as Fed, Greenspan garnered celebrity status. He was so well received by the public even a Joe the Plumber would take heed of a Greenspan press conference.

But that was then and this is now.

Since his departure from the Fed in 2006, Alan Greenspan has been under a barrage of attacks from politicians, economists, and journalists. In the United States' attempt to understand (and/or find a scapegoat for) the current economic crisis, perhaps no other individual (save W.) has bore the brunt of public criticism more than Greenspan. Almost all of the articles--ranging from the Financial Times to American Banker and led by some of world’s leading economists, including two Nobel Memorial Prize in Economic Sciences winners, Edmund Phelps and Joseph Stiglitz--pin Greenspan as the architect of the economic mess the globe is in today.

Why such sharp criticism? Many point to Greenspan's praise of free market economics while at the same time vehemently opposing any intervention into the arena of his beloved, albeit complex, derivatives to assess risk and securities. One of those, Mortgage Backed Securities, played a major role in creating the current economic tsunami.

Sitting on Capital Hill today fielding bullets from inquiring senators and congresspersons, Alan Greenspan conceded that it was his error in judgment believing in the viability, strength, and self-correcting nature of the unregulated, free-market. He stated, “I made a mistake in presuming that the self-interests of organizations, specifically banks and others, were such as that they were best capable of protecting their own shareholders and their equity in the firms.” Referring to his free-market ideology, Mr. Greenspan added: “I have found a flaw. I don’t know how significant or permanent it is. But I have been very distressed by that fact.”

Now, is this reason to abandon free-market ideology? No. Is this a reason to go on a Teddy Roosevelt-style gang-busting spree? Certainly not. Should we adopt and enforce unprecedented regulation since the late-nineteenth century? Perhaps not, but it looks like we might be headed there anyway.

What is necessary though, isn't more of what has gone on in the media. That is, trying to find a scapegoat or to vilify one group or another. As groups, Wall Street, predatory lenders, home owners, economists, George Bush, derivatives gone mad, and all the other things we've heard in the media are not the root of the problem. Indeed they are problems, but they are only that in so much as they are symptomatic of the problem.

What we must do is address the fundamental problem. The fundamental problem is that our business models, assumptions, risk assessments haven't reflected the immense change in economies over the past half century. One way of addressing this is imposing governmental regulation. But it is important that the regulation is adjusted, changed, invented so that it incorporates and accounts for these changes in the economy of the United States and economies abroad. Similarly, another way to address the problem is a significant reevaluation of commonly held economic beliefs, models, and practices. Finally, to steal one from Sous, a commitment to responsibility on part of everyone in this country is needed. We are quick to forget Enron and to think that this problem has been solved because Kenneth Lay is dead and Jeff Skilling is in jail, but it is not.

I wish I could offer a more detailed solution, but I do not have a Doctorate of Philosophy in Economics.