Sunday, May 15, 2005

Quotations from Chairman Greenspan

From Alan Greenspan's Wharton address on Sunday, May, 15, 2005:

The principles governing business behavior are an essential support to voluntary exchange, the defining characteristic of free markets. Voluntary exchange, in turn, implies trust in the word of those with whom we do business. To be sure, all market economies require a rule of law to function--laws of contracts, rights to property, and a general protection of citizens from arbitrary actions of the state. Yet, if even a small fraction of legally binding transactions required adjudication, our court systems would be swamped into immobility, and a rule of law would be unenforceable.
Of necessity, therefore, in virtually all our transactions, whether with customers or with colleagues, with friends or with strangers, we rely on the word of those with whom we do business. If we could not do so, goods and services could not be exchanged efficiently.


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Moreover, even when followed to the letter, laws guide only a few of the day-to-day decisions required of business and financial managers. The rest are governed by whatever personal code of values market participants bring to the table.

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Trust as the necessary condition for commerce was particularly evident in freewheeling nineteenth-century America, where reputation became a valued asset. Throughout much of that century, laissez-faire reigned in the United States as elsewhere, and caveat emptor was the prevailing prescription for guarding against wide-open trading practices. In such an environment, a reputation for honest dealing, which many feared was in short supply, was particularly valued. Even those inclined to be less than scrupulous in their personal dealings had to adhere to a more ethical standard in their market transactions, or they risked being driven out of business.

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But material success is possible in this world, and far more satisfying, when it comes without exploiting others. The true measure of a career is to be able to be content, even proud, that you succeeded through your own endeavors without leaving a trail of casualties in your wake.

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Prejudice of whatever stripe is unworthy of a society built on individual merit. A free market capitalist system cannot operate fully effectively unless all participants in the economy are given opportunities to achieve their best. If we succeed in opening up opportunities to everyone, our national affluence will almost surely become more widespread. Of even greater import is that all Americans recognize that they are part of a system that is fair and worthy of support.

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