David Scull/Bloomberg News Alan Greenspan presiding over a meeting of the Fed Board of Governors in 2005.

Alan Greenspan’s reputation obviously isn’t what it used to be, and for good reason. His re-entry into partisan politics — arguing that Wall Street is over-regulated — probably won’t help. But it would be a mistake to turn him into a caricature of an unsuccessful central banker, just as it was a mistake to lionize him in the past.

In the late 1990s, Mr. Greenspan took a difficult, even courageous, stand for a Federal Reserve chairman. He defied its usual bias toward fighting inflation over fighting unemployment. As Business Week recalled:

When Alan Greenspan took charge of the Federal Reserve in August, 1987, businesspeople and economic cognoscenti thought they knew what they were getting: a dedicated — even obsessive — inflation fighter who would be willing to provoke a recession to hold down prices. As one Republican told Business Week at the time, Greenspan “feels in his bones that austerity is good for you.”…

[But] Greenspan was one of the first economists to embrace the notion of a technology-driven productivity boom in the second half of the 1990s — the so-called New Economy. His willingness to keep rates low despite criticism from inside and outside the Fed helped fuel business investment and growth.

In the process, Mr. Greenspan helped demonstrate that unemployment could fall lower than many economists had believed without setting off inflation. The late 1990s remain the only sustained period over the past 35 years when incomes rose at a healthy rate all across the income spectrum. The jobless rate, at its nadir, was below 4 percent.

The contrast with the today’s situation — when unemployment is near a 27-year high, median household income is lower than a decade ago, core inflation is far below its long-term average and yet some Fed officials are more worried about the economy being too strong than it being too weak — is telling.

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