Not only did American banks at that time have much higher capital:asset ratios than ten or 20 years earlier, but they also had enough ammunition set aside to deal with losses arising from the most traumatic    macroeconomic conditions since the 1930s. By extension, the case for a large further increase in capital ratios was and remains questionable. Given his well-known ideological positions, Greenspan might have been expected in The Map and the Territory to rubbish the critics of American capitalism. But instead he equivocates and gives far too much comfort to academics, regulators and politicians who are determined to denounce the market economy. 

It cannot be emphasised too strongly that the failure of Lehman Brothers was not to blame for the Great Recession. But then who or what was responsible? There is a deep and unsettling paradox here. The regulatory response to the Lehman bankruptcy was to demand that banks raise more capital quickly, and to impose additional capital relative to balance-sheet totals in a more onerous regulatory regime. But that move towards higher capital:asset ratios caused banks in 2009 and 2010 to shed assets and shrink their balance sheets, with the further result that the quantity of money (such as the M2 measure, dominated by banks' deposit liabilities) stopped growing. An argument can be made that the plunge in money growth was the cause of the Great Recession. Official bungling as well as investment bankers' greed and folly must then be highlighted in any even-handed analysis of the Great Recession. (I argued that abrupt bank recapitalisation and regulatory tightening of late 2008 aggravated the downturn in my March 2011 Standpoint article, "Gordon Brown's Recessional".) 

Talking of M2 (which was Milton Friedman's favourite money aggregate), Greenspan is unusual among contemporary American economists in still seeing a connection between money and inflation. Fair enough, but he fails totally to understand that the regulatory onslaught from 2008 was the main reason for the crash in money growth from double-digit rates in 2007 to zero in 2009 and 2010. He therefore overlooks the possibility that the Great Recession, like the Great Depression of the early 1930s, can be attributed to a boom-bust in money growth. Has he forgotten the thesis of Friedman and Schwartz's celebrated 1963 work, A Monetary History of the USA, which said that the Great Depression was caused by a collapse in the quantity of money, and was not due to the inefficiency of capitalism's financial institutions? Can he not see that the Great Depression and the Great Recession may be analysed in similar cause-and-effect terms?

Alan Greenspan has been a force for good in American public life for 50 years, and he deserves yet another medal for writing an interesting and challenging book in his late eighties. But The Map and the Territory is not the last word, and we eagerly await its successor.