Praise the boom, don't bury it. (Forward Observer).

Revisionists, acting with what author Michael Lewis calls a "mob mentality," have turned on the 1990s. They're lynching a decade. Its crime? Mindless greed. These journalists, pundits, and politicians enjoy attacking Alan Greenspan as the sheriff who stood by while the reckless decade went on its rampage.

Typical of the scolds is John Cassidy of The New Yorker. "If anyone had the moral and intellectual authority to prick the bubble, it was Greenspan" he writes. Gretchen Morgenson of the New York Times likewise cites the Federal Reserve chairman's "inaction in the face of an obvious stock market mania." The truth is that the 1990s boom created record prosperity, and produced new ideas and inventions that will continue to enrich American lives far into the future. It's time not to bury the last decade but to praise it--and Greenspan, too.

First, distinguish between the stock market and the economy. Yes, the Dow Jones Industrial Average fell from over 11,000 to near 7,000, and the Nasdaq Composite, at its depth, lost more than three quarters of its value. But the economy itself took no such swoon. Between 1992 and 2002, economic growth averaged 3.7 percent a year. Fully 17 million new jobs were created.

As for the stock market: Stock prices are determined by the views that millions of buyers and sellers hold today about the profits companies will earn in the future. Investors often become too optimistic, especially about individual sectors or companies. Just as often, they get too pessimistic. Bubbles (if that's what you want to call the periods of excessive optimism) are only "obvious" in retrospect.

But just for fun, let's assume policymakers in Washington are smarter than investors and can identify bubbles early on. What should policymakers do? That is the question Greenspan addressed in an important speech on December 19: "Whether incipient bubbles can be detected in real time and whether, once detected, they can be defused without inadvertently precipitating still greater adverse consequences for the economy remains in doubt." In classic hedged Greenspan-speak that means: Don't expect miracles from regulators.

Sharp increases in stock prices almost always occur during periods of ...