In This Review

The Map and the Territory: Risk, Human Nature, and the Future of Forecasting
The Map and the Territory: Risk, Human Nature, and the Future of Forecasting
By Alan Greenspan
The Penguin Press HC, 2013, 400 pp.

Greenspan, who served as chair of the U.S. Federal Reserve from 1987 to 2006, is possibly unique among central bankers in having become a celebrity. He presided over nearly two decades of U.S. economic prosperity, guided by a monetary policy protected and defended by his profoundly Delphic pronouncements. An economic forecaster in private life, he had as good a grasp of the U.S. economy as anyone, perhaps even better -- or so he thought. The financial crisis of 2008 was perhaps a greater shock to him than to many others, precisely because his understanding turned out to be badly off the mark. This book is his attempt to come to terms with those traumatic events. He identifies psychological propensities that influence economic and financial behavior and tries to find patterns in those propensities that might provide guidance to future economic forecasters. In addition to examining his own failure to appreciate the irrational elements of a seemingly rational economic system, he reflects on many other issues: the U.S. political system, now stalled by its inability to reach necessary compromises; American technology and education; and the excessive size of today’s largest financial institutions.