Following the Enron scandal, there have been widespread calls for more government regulation of accounting and financial markets. I take the opposite position and suggest that it has been exactly an increase in rules and regulations that brought us to Enron and other cases of faulty accounting in recent years. I think that the real solution to the problem is to properly deregulate financial markets and the financial accounting system.
A radical idea? Yes, but one I hold with good company. The NYU Stern School of Business’ most famous Alumnus, Alan Greenspan, predicted that government regulations could lead to this kind of mess almost forty years ago in an essay “The Assault on Integrity,” later republished in Ayn Rand’s “Capitalism: The Unknown Ideal.” While Alan Greenspan is now known as a master of obfuscation, back in 1963, under Ayn Rand’s auspices, he wrote with remarkable vigor and clarity. Here are some choice quotes few would guess were penned by Greenspan:
“Reputation, in an unregulated economy, is a major competitive tool. It requires years of consistently excellent performance to acquire a reputation and to establish it as a financial asset
