Joseph Eugene Stiglitz (; born February 9, 1943) is an American
New Keynesian
New Keynesian economics is a school of macroeconomics that strives to provide microeconomic foundations for Keynesian economics. It developed partly as a response to criticisms of Keynesian macroeconomics by adherents of new classical macroec ...
economist
An economist is a professional and practitioner in the social science discipline of economics.
The individual may also study, develop, and apply theories and concepts from economics and write about economic policy. Within this field there are ...
, a
public policy analyst
Policy analysis is a technique used in the public administration sub-field of political science to enable civil servants, nonprofit organizations, and others to examine and evaluate the available options to implement the goals of laws and elected ...
, and a full professor at
Columbia University
Columbia University (also known as Columbia, and officially as Columbia University in the City of New York) is a private research university in New York City. Established in 1754 as King's College on the grounds of Trinity Church in Manhatt ...
. He is a recipient of the
Nobel Memorial Prize in Economic Sciences
The Nobel Memorial Prize in Economic Sciences, officially the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel ( sv, Sveriges riksbanks pris i ekonomisk vetenskap till Alfred Nobels minne), is an economics award administered ...
(2001) and the
John Bates Clark Medal
The John Bates Clark Medal is awarded by the American Economic Association to "that American economist under the age of forty who is adjudged to have made a significant contribution to economic thought and knowledge." The award is named after the ...
(1979).
He is a former senior vice president and
chief economist Chief economist is a single-position job class having primary responsibility for the development, coordination, and production of economic and financial analysis. It is distinguished from the other economist positions by the broader scope of respons ...
of the
World Bank
The World Bank is an international financial institution that provides loans and grants to the governments of low- and middle-income countries for the purpose of pursuing capital projects. The World Bank is the collective name for the Inte ...
. He is also a former member and chairman of the (US president's)
Council of Economic Advisers. He is known for his support of
Georgist public finance theory and for his critical view of the management of
globalization
Globalization, or globalisation (English in the Commonwealth of Nations, Commonwealth English; American and British English spelling differences#-ise, -ize (-isation, -ization), see spelling differences), is the process of foreign relation ...
, of ''
laissez-faire
''Laissez-faire'' ( ; from french: laissez faire , ) is an economic system in which transactions between private groups of people are free from any form of economic interventionism (such as subsidies) deriving from special interest groups ...
'' economists (whom he calls "
free-market fundamentalists"), and of international institutions such as the
International Monetary Fund
The International Monetary Fund (IMF) is a major financial agency of the United Nations, and an international financial institution, headquartered in Washington, D.C., consisting of 190 countries. Its stated mission is "working to foster glo ...
and the
World Bank
The World Bank is an international financial institution that provides loans and grants to the governments of low- and middle-income countries for the purpose of pursuing capital projects. The World Bank is the collective name for the Inte ...
.
In 2000, Stiglitz founded the
Initiative for Policy Dialogue (IPD), a
think tank
A think tank, or policy institute, is a research institute that performs research and advocacy concerning topics such as social policy, political strategy, economics, military, technology, and culture. Most think tanks are non-governmenta ...
on international development based at Columbia University. He has been a member of the Columbia faculty since 2001, and received the university's highest academic rank (
university professor
Professor (commonly abbreviated as Prof.) is an academic rank at universities and other post-secondary education and research institutions in most countries. Literally, ''professor'' derives from Latin as a "person who professes". Professor ...
) in 2003. He was the founding chair of the university's Committee on Global Thought. He also chairs the
University of Manchester
, mottoeng = Knowledge, Wisdom, Humanity
, established = 2004 – University of Manchester Predecessor institutions: 1956 – UMIST (as university college; university 1994) 1904 – Victoria University of Manchester 1880 – Victoria Univ ...
's
Brooks World Poverty Institute
The Brooks World Poverty Institute (BWPIis a research centre at the University of Manchester dedicated to multidisciplinary research on poverty, inequality and growth. It was established in 2005 following the donation of £1.3 million to the un ...
. He was a member of the
Pontifical Academy of Social Sciences
The Pontifical Academy of Social Sciences ( la, Pontificia Academia Scientiarum Socialium, or PASS) is a pontifical academy established on 1 January 1994 by Pope John Paul II and is headquartered in the Casina Pio IV in Vatican City. It operat ...
. In 2009, the
President of the United Nations General Assembly Miguel d'Escoto Brockmann
Miguel d’Escoto Brockmann (February 5, 1933 – June 8, 2017) was an American-born Nicaraguan diplomat, politician and Catholic priest of the Maryknoll Missionary Society. As the President of the United Nations General Assembly from September ...
, appointed Stiglitz as the chairman of the U.N. Commission on Reforms of the International Monetary and Financial System, where he oversaw suggested proposals and commissioned a report on reforming the international monetary and financial system. He served as chair of the international
, appointed by President Sarkozy of France, which issued its report in 2010, ''Mismeasuring our Lives: Why GDP doesn't add up,'' and currently serves as co-chair of its successor, the High Level Expert Group on the Measurement of Economic Performance and Social Progress. From 2011 to 2014, Stiglitz was president of the
International Economic Association
The International Economic Association (IEA) is an NGO established in 1950, at the instigation of the Social Sciences Department of UNESCO. To date, the IEA still shares information and maintains consultative relations with UNESCO. In 1973 the IE ...
(IEA). He presided over the organization of the IEA triennial world congress held near the
Dead Sea in Jordan in June 2014.
Stiglitz has received more than 40 honorary degrees, including degrees from
Cambridge
Cambridge ( ) is a College town, university city and the county town in Cambridgeshire, England. It is located on the River Cam approximately north of London. As of the 2021 United Kingdom census, the population of Cambridge was 145,700. Cam ...
and
Harvard, and he has been decorated by several governments including
Bolivia,
South Korea
South Korea, officially the Republic of Korea (ROK), is a country in East Asia, constituting the southern part of the Korean Peninsula and sharing a land border with North Korea. Its western border is formed by the Yellow Sea, while its eas ...
,
Colombia,
Ecuador
Ecuador ( ; ; Quechua: ''Ikwayur''; Shuar: ''Ecuador'' or ''Ekuatur''), officially the Republic of Ecuador ( es, República del Ecuador, which literally translates as "Republic of the Equator"; Quechua: ''Ikwadur Ripuwlika''; Shuar: ' ...
, and most recently
France
France (), officially the French Republic ( ), is a country primarily located in Western Europe. It also comprises of overseas regions and territories in the Americas and the Atlantic, Pacific and Indian Oceans. Its metropolitan area ...
, where he was appointed as a member of the Legion of Honor, Officer.
In 2011, Stiglitz was named by ''
Time
Time is the continued sequence of existence and events that occurs in an apparently irreversible succession from the past, through the present, into the future. It is a component quantity of various measurements used to sequence events, ...
'' magazine as one of the
100 most influential people in the world
''Time'' 100 (often stylized as ''TIME'' 100) is an annual listicle of the 100 most influential people in the world, assembled by the American news magazine '' Time''. First published in 1999 as the result of a debate among American academics, ...
. Stiglitz's work focuses on income distribution from a
Georgist perspective, asset risk management, corporate governance, and international trade. He is the author of several books, the latest being ''People, Power, and Profits'' (2019), ''The Euro: How a Common Currency Threatens the Future of Europe'' (2016), ''The Great Divide: Unequal Societies and What We Can Do About Them'' (2015), ''Rewriting the Rules of the American Economy: An Agenda for Growth and Shared Prosperity'' (2015), and ''Creating a Learning Society: A New Approach to Growth Development and Social Progress'' (2014). He is also one of the 25 leading figures on the Information and Democracy Commission launched by
Reporters Without Borders. According to the
Open Syllabus Project
The Open Syllabus Project (OSP) is an online open-source platform that catalogs and analyzes millions of college syllabi. Founded by researchers from the American Assembly at Columbia University, the OSP has amassed the most extensive collecti ...
, Stiglitz is the fifth most frequently cited author on college syllabi for economics courses.
Life and career
Stiglitz was born in
Gary, Indiana
Gary is a city in Lake County, Indiana, United States. The city has been historically dominated by major industrial activity and is home to U.S. Steel's Gary Works, the largest steel mill complex in North America. Gary is located along the sou ...
. His mother was Charlotte (née Fishman), a schoolteacher, and his father was Nathaniel David Stiglitz, an insurance salesman. Stiglitz attended
Amherst College, where he was a
National Merit Scholar
The National Merit Scholarship Program is a United States academic scholarship competition for recognition and university scholarships administered by the National Merit Scholarship Corporation (NMSC), a privately funded, not-for-profit organizati ...
, active on the debate team, and president of the student government.
During his senior year at Amherst College, he studied at the
Massachusetts Institute of Technology
The Massachusetts Institute of Technology (MIT) is a private land-grant research university in Cambridge, Massachusetts. Established in 1861, MIT has played a key role in the development of modern technology and science, and is one of the ...
(MIT), where he later pursued graduate work.
In Summer 1965, he moved to the
University of Chicago
The University of Chicago (UChicago, Chicago, U of C, or UChi) is a private university, private research university in Chicago, Illinois. Its main campus is located in Chicago's Hyde Park, Chicago, Hyde Park neighborhood. The University of Chic ...
to do research under
Hirofumi Uzawa
was a Japanese economist.
Biography
Uzawa was born on July 21, 1928 in Yonago, Tottori to a farming family.
He attended the Tokyo First Middle School (currently the Hibiya High School ) and the First Higher School, Japan (now the University ...
who had received an
NSF
NSF may stand for:
Political organizations
*National Socialist Front, a Swedish National Socialist party
*NS-Frauenschaft, the women's wing of the former German Nazi party
*National Students Federation, a leftist Pakistani students' political gr ...
grant. He studied for his PhD from MIT from 1966 to 1967, during which time he also held an MIT assistant professorship.
Stiglitz stated that the particular style of MIT economics suited him well, describing it as "simple and concrete models, directed at answering important and relevant questions."
From 1966 to 1970 he was a research fellow at the
University of Cambridge
The University of Cambridge is a public collegiate research university in Cambridge, England. Founded in 1209 and granted a royal charter by Henry III in 1231, Cambridge is the world's third oldest surviving university and one of its most pr ...
.
Stiglitz initially arrived at
Fitzwilliam College, Cambridge
Fitzwilliam College is a constituent college of the University of Cambridge
, mottoeng = Literal: From here, light and sacred draughts.
Non literal: From this place, we gain enlightenment and precious knowledge.
, establish ...
as a
Fulbright Scholar in 1965, and he later won a Tapp Junior Research Fellowship at
Gonville and Caius College, Cambridge
Gonville and Caius College, often referred to simply as Caius ( ), is a constituent college of the University of Cambridge in Cambridge, England. Founded in 1348, it is the fourth-oldest of the University of Cambridge's 31 colleges and one of t ...
which was instrumental in shaping his understanding of
Keynes
John Maynard Keynes, 1st Baron Keynes, ( ; 5 June 1883 – 21 April 1946), was an English economist whose ideas fundamentally changed the theory and practice of macroeconomics and the economic policies of governments. Originally trained in m ...
and macroeconomic theory.
In subsequent years, he held academic positions at
Yale
Yale University is a private research university in New Haven, Connecticut. Established in 1701 as the Collegiate School, it is the third-oldest institution of higher education in the United States and among the most prestigious in the wor ...
,
Stanford,
Oxford
Oxford () is a city in England. It is the county town and only city of Oxfordshire. In 2020, its population was estimated at 151,584. It is north-west of London, south-east of Birmingham and north-east of Bristol. The city is home to the ...
- where he was
Drummond Professor of Political Economy - and
Princeton
Princeton University is a private research university in Princeton, New Jersey. Founded in 1746 in Elizabeth as the College of New Jersey, Princeton is the fourth-oldest institution of higher education in the United States and one of the ni ...
. Since 2001, Stiglitz has been a professor at
Columbia University
Columbia University (also known as Columbia, and officially as Columbia University in the City of New York) is a private research university in New York City. Established in 1754 as King's College on the grounds of Trinity Church in Manhatt ...
, with appointments at the
Business School, the Department of Economics and the
School of International and Public Affairs
The School of International and Public Affairs at Columbia University (SIPA) is the international affairs and public policy school of Columbia University, a private Ivy League university located in Morningside Heights, Manhattan, New York City. ...
(SIPA), and is editor of ''
The Economists' Voice
The Economists' Voice is a publishing forum for professional economists that seeks to fill the gap between op-ed pages of newspapers and scholarly journal articles. Published by Walter de Gruyter, the forum brings to bear scholarly work and academ ...
'' journal with
J. Bradford DeLong
James Bradford "Brad" DeLong (born June 24, 1960) is an economic historian who is a professor of economics at the University of California, Berkeley. DeLong served as Deputy Assistant Secretary of the U.S. Department of the Treasury in the Clinto ...
and
Aaron Edlin
Aaron S. Edlin (born 1967) is an American economist and lawyer specializing in antitrust and competition policy. In 1997–1998, he served in the Clinton White House as Senior Economist within the Council of Economic Advisers focusing on the ...
.
He also gives classes for a double-degree program between
Sciences Po Paris and
École Polytechnique
École may refer to:
* an elementary school in the French educational stages normally followed by secondary education establishments (collège and lycée)
* École (river), a tributary of the Seine flowing in région Île-de-France
* École, Savoi ...
in 'Economics and Public Policy'. He has chaired The Brooks World Poverty Institute at the
University of Manchester
, mottoeng = Knowledge, Wisdom, Humanity
, established = 2004 – University of Manchester Predecessor institutions: 1956 – UMIST (as university college; university 1994) 1904 – Victoria University of Manchester 1880 – Victoria Univ ...
since 2005. Stiglitz is widely considered a
New-Keynesian economist, although at least one economics journalist says his work cannot be so clearly categorised.
Stiglitz has played a number of policy roles throughout his career. He served in the
Clinton administration as the chair of the President's
Council of Economic Advisers (1995–1997).
At the
World Bank
The World Bank is an international financial institution that provides loans and grants to the governments of low- and middle-income countries for the purpose of pursuing capital projects. The World Bank is the collective name for the Inte ...
, he served as senior vice-president and chief economist from 1997 to 2000. He was fired by the World Bank for expressing dissent with its policies.
Stiglitz has advised American president
Barack Obama
Barack Hussein Obama II ( ; born August 4, 1961) is an American politician who served as the 44th president of the United States from 2009 to 2017. A member of the Democratic Party, Obama was the first African-American president of the ...
, but has criticized the
Obama Administration's financial-industry rescue plan. He said whoever designed the Obama administration's bank rescue plan is "either in the pocket of the banks or they're incompetent."
In October 2008, he was asked by the President of the United Nations General Assembly to chair a commission drafting a report on the reasons for and solutions to the financial crisis. In response, the commission produced the
Stiglitz Report.
On July 25, 2011, Stiglitz participated in the "I Foro Social del 15M" organized in
Madrid
Madrid ( , ) is the capital and most populous city of Spain. The city has almost 3.4 million inhabitants and a Madrid metropolitan area, metropolitan area population of approximately 6.7 million. It is the Largest cities of the Europ ...
, expressing his support to
15M Movement protestors.
Stiglitz was the president of the International Economic Association from 2011 to 2014.
On September 27, 2015, the United Kingdom Labour Party announced that Stiglitz was to sit on its Economic Advisory Committee along with five other world-leading economists.
Contributions to economics
![Joseph Stiglitz](https://upload.wikimedia.org/wikipedia/commons/2/26/Joseph_Stiglitz.jpg)
After the 2018 mid-term elections in the United States he wrote a statement about the importance of economic justice to the survival of democracy worldwide.
Risk aversion
After getting his Ph.D. from
M.I.T.
The Massachusetts Institute of Technology (MIT) is a private land-grant research university in Cambridge, Massachusetts. Established in 1861, MIT has played a key role in the development of modern technology and science, and is one of the m ...
in 1967, Stiglitz co-authored one of his first papers with
Michael Rothschild for the Journal of Economic Theory in 1970. Stiglitz and Rothschild built upon works by economists such as
Robert Solow
Robert Merton Solow, GCIH (; born August 23, 1924) is an American economist whose work on the theory of economic growth culminated in the exogenous growth model named after him. He is currently Emeritus Institute Professor of Economics at the ...
on the concept of
risk aversion
In economics and finance, risk aversion is the tendency of people to prefer outcomes with low uncertainty to those outcomes with high uncertainty, even if the average outcome of the latter is equal to or higher in monetary value than the more c ...
. Stiglitz and Rothschild showed three plausible definitions of a variable X being 'more variable' than a variable Y were all equivalent - Y being equal to X plus noise, every risk-averse agent preferring Y to X, and Y having more weight in its tails, and that none of these were always consistent with X having a higher statistical variance than Y - a commonly used definition at the time. In a second paper, they analyzed the theoretical consequences of risk aversion in various circumstances, such as an individual's savings decisions and a firm's production decisions.
Henry George theorem
Stiglitz made early contributions to a theory of public finance stating that an optimal supply of local
public goods
In economics, a public good (also referred to as a social good or collective good)Oakland, W. H. (1987). Theory of public goods. In Handbook of public economics (Vol. 2, pp. 485-535). Elsevier. is a good that is both non-excludable and non-riv ...
can be funded entirely through
capture of the
land
Land, also known as dry land, ground, or earth, is the solid terrestrial surface of the planet Earth that is not submerged by the ocean or other bodies of water. It makes up 29% of Earth's surface and includes the continents and various isla ...
rents generated by those goods (when population distributions are optimal). Stiglitz dubbed this the '
Henry George theorem' in reference to the radical
classical economist Henry George
Henry George (September 2, 1839 – October 29, 1897) was an American political economist and journalist. His writing was immensely popular in 19th-century America and sparked several reform movements of the Progressive Era. He inspired the eco ...
who famously advocated for
land value tax
A land value tax (LVT) is a levy on the value of land (economics), land without regard to buildings, personal property and other land improvement, improvements. It is also known as a location value tax, a point valuation tax, a site valuation ta ...
. The explanation behind Stiglitz's finding is that rivalry for public goods takes place geographically, so competition for access to any beneficial public good will increase land values by at least as much as its outlay cost. Furthermore, Stiglitz shows that a
single tax on rents is necessary to provide the optimal supply of local public investment. Stiglitz also shows how the theorem could be used to find the optimal size of a city or firm.
Information asymmetry
Stiglitz's most famous research was on
screening
Screening may refer to:
* Screening cultures, a type a medical test that is done to find an infection
* Screening (economics), a strategy of combating adverse selection (includes sorting resumes to select employees)
* Screening (environmental), a ...
, a technique used by one economic agent to extract otherwise private information from another. It was for this contribution to the theory of
information asymmetry
In contract theory and economics, information asymmetry deals with the study of decisions in transactions where one party has more or better information than the other.
Information asymmetry creates an imbalance of power in transactions, which ca ...
that he shared the Nobel Memorial Prize in Economics
in 2001 "for laying the foundations for
the theory of markets with asymmetric information" with
George A. Akerlof and
A. Michael Spence
Andrew Michael Spence (born November 7, 1943) is a Canadian-American economist and Nobel laureate.
Spence is the William R. Berkley Professor in Economics and Business at the Stern School of Business at New York University, and the Philip H. Kni ...
.
Much of Stiglitz's work on
information economics
Information economics or the economics of information is the branch of microeconomics that studies how information and information systems affect an economy and economic decisions.
One application considers information embodied in certain types ...
demonstrates situations in which incomplete information prevents markets from achieving social efficiency. His paper with
Andrew Weiss showed that if banks use interest rates to infer information about borrowers' types (adverse selection effect), or to encourage their actions following borrowing (incentive effect), then credit will be rationed below the optimal level, even in a competitive market. Stiglitz and
Rothschild
Rothschild () is a name derived from the German ''zum rothen Schild'' (with the old spelling "th"), meaning "with the red sign", in reference to the houses where these family members lived or had lived. At the time, houses were designated by sign ...
showed that in an insurance market, firms have an incentive to undermine a 'pooling equilibrium', where all agents are offered the same full-insurance policy, by offering cheaper partial insurance that would only be attractive to the low-risk types, meaning that a competitive market can only achieve partial coverage of agents. Stiglitz and
Grossman showed that trivially small information acquisition costs prevent financial markets from achieving complete informational efficiency, since agents will have an incentive to free-ride on others' information acquisition, and acquire this information indirectly by observing market prices.
Monopolistic competition
Stiglitz, together with
Avinash Dixit
Avinash Kamalakar Dixit (born 6 August 1944) is an Indian-American economist. He is the John J. F. Sherrerd '52 University Professor of Economics Emeritus at Princeton University, and has been Distinguished Adjunct Professor of Economics at Lin ...
, created a tractable model of
monopolistic competition
Monopolistic competition is a type of imperfect competition such that there are many producers competing against each other, but selling products that are differentiated from one another (e.g. by branding or quality) and hence are not perfec ...
that was an alternative to traditional perfect-competition models of general equilibrium. They showed that in the presence of increasing returns to scale, the entry of firms is socially too small. The model was extended to show that when consumers have a preference for diversity, entry can be socially too large. The modeling approach was also influential in the fields of trade theory, and industrial organization, and was used by
Paul Krugman
Paul Robin Krugman ( ; born February 28, 1953) is an American economist, who is Distinguished Professor of Economics at the Graduate Center of the City University of New York, and a columnist for ''The New York Times''. In 2008, Krugman was ...
in his analysis of non-comparative advantage trading patterns.
Shapiro–Stiglitz efficiency wage model
![Efficiency wage Shapiro Stiglitz](https://upload.wikimedia.org/wikipedia/commons/1/1c/Efficiency_wage_Shapiro_Stiglitz.svg)
Stiglitz also did research on
efficiency wages
The term efficiency wages (or rather "efficiency earnings") was introduced by Alfred Marshall to denote the wage per efficiency unit of labor. Marshallian efficiency wages would make employers pay different wages to workers who are of different ef ...
, and helped create what became known as the "Shapiro–Stiglitz model" to explain why there is unemployment even in equilibrium, why wages are not bid down sufficiently by job seekers (in the absence of minimum wages) so that everyone who wants a job finds one, and to question whether the
neoclassical paradigm could explain
involuntary unemployment.
[ An answer to these puzzles was proposed by Shapiro and Stiglitz in 1984: "Unemployment is driven by the information structure of employment".] Two basic observations undergird their analysis:
# Unlike other forms of capital, humans can choose their level of effort.
# It is costly for firms to determine how much effort workers are exerting.
A full description of this model can be found at the links provided. Some key implications of this model are:
# Wages do not fall enough during recessions to prevent unemployment from rising. If the demand for labour falls, this lowers wages. But because wages have fallen, the probability of 'shirking' (workers not exerting effort) has risen. If employment levels are to be maintained, through a sufficient lowering of wages, workers will be less productive than before through the shirking effect. As a consequence, in the model, wages do not fall enough to maintain employment levels at the previous state, because firms want to avoid excessive shirking by their workers. So, unemployment must rise during recessions, because wages are kept 'too high'.
# Possible corollary: Wage sluggishness. Moving from one private cost of hiring (w∗) to another private cost of hiring (w∗∗) will require each firm to repeatedly re-optimize wages in response to shifting unemployment rate. Firms cannot cut wages until unemployment rises sufficiently (a coordination problem).
The outcome is never Pareto efficient.
# Each firm employs too few workers, because the cost of employing too many workers would be faced by the firm alone, while the cost of unemployment is shared by the firm and its competitors, indeed it is shared by all firms that pay taxes in the country. This means that firms do not "internalize" the "external" cost of unemployment they do not factor how large-scale unemployment harms society when assessing their own costs. This leads to a negative externality as marginal social cost exceeds the firm's marginal cost (MSC = Firm's Private Marginal Cost + Marginal External Cost of increased social unemployment)
# There are also positive externalities: each firm increases the asset value of unemployment for all other firms when they hire during recessions. By creating hypercompetitive labor markets, all firms (the winners when laborers compete) experience an increase in value. However, this effect of increased valuation is very unapparent, because the first problem (the negative externality of sub-optimal hiring) clearly dominates since the 'natural rate of unemployment' is always too high.
Practical implications of Stiglitz's theories
The practical implications of Stiglitz's work in political economy
Political economy is the study of how economic systems (e.g. markets and national economies) and political systems (e.g. law, institutions, government) are linked. Widely studied phenomena within the discipline are systems such as labour ...
and their economic policy implications have been subject to debate. Stiglitz himself has evolved his political-economic discourse over time.
Objections to the adoption of positions suggested by Stiglitz's do not come from economics itself , but mostly from political scientists, especially in the field of sociology
Sociology is a social science that focuses on society, human social behavior, patterns of social relationships, social interaction, and aspects of culture associated with everyday life. It uses various methods of empirical investigation an ...
. As David L. Prychitko discusses in his "critique" to ''Whither Socialism?'' (see below), although Stiglitz's main economic insight seems generally correct , it still leaves open great constitutional questions such as how the coercive institutions of the government should be constrained and what the relation is between the government and civil society.
Government
Clinton administration
Stiglitz joined the Clinton Administration in 1993, serving first as a member during 1993–1995, and was then appointed Chairman of the Council of Economic Advisers on June 28, 1995, in which capacity he also served as a member of the cabinet. He became deeply involved in environmental issues, which included serving on the Intergovernmental Panel on Climate Change, and helping draft a new law for toxic wastes (which was never passed).
Stiglitz's most important contribution in this period was helping define a new economic philosophy, a "third way", which postulated the important, but limited, role of government, that unfettered markets often did not work well, but that government was not always able to correct the limitations of markets. The academic research that he had been conducting over the preceding 25 years provided the intellectual foundations for this "third way".
When President Bill Clinton
William Jefferson Clinton ( né Blythe III; born August 19, 1946) is an American politician who served as the 42nd president of the United States from 1993 to 2001. He previously served as governor of Arkansas from 1979 to 1981 and agai ...
was re-elected, he asked Stiglitz to continue to serve as Chairman of the Council of Economic Advisers for another term. But he had already been approached by the World Bank
The World Bank is an international financial institution that provides loans and grants to the governments of low- and middle-income countries for the purpose of pursuing capital projects. The World Bank is the collective name for the Inte ...
to be its senior vice president for development policy and its chief economist, and he assumed that position after his CEA successor was confirmed on February 13, 1997.
As the World Bank began its ten-year review of the transition of the former Communist countries
A communist state, also known as a Marxist–Leninist state, is a one-party state that is administered and governed by a communist party guided by Marxism–Leninism. Marxism–Leninism was the state ideology of the Soviet Union, the Cominte ...
to the market economy it unveiled the failures of the countries that had followed the International Monetary Fund
The International Monetary Fund (IMF) is a major financial agency of the United Nations, and an international financial institution, headquartered in Washington, D.C., consisting of 190 countries. Its stated mission is "working to foster glo ...
(IMF) shock therapy policies both in terms of the declines in GDP and increases in poverty that were even worse than the worst that most of its critics had envisioned at the onset of the transition. Clear links existed between the dismal performances and the policies that the IMF had advocated, such as the voucher privatization schemes and excessive monetary stringency. Meanwhile, the success of a few countries that had followed quite different strategies suggested that there were alternatives that could have been followed. The US Treasury
The Department of the Treasury (USDT) is the national treasury and finance department of the federal government of the United States, where it serves as an executive department. The department oversees the Bureau of Engraving and Printing and ...
had put enormous pressure on the World Bank
The World Bank is an international financial institution that provides loans and grants to the governments of low- and middle-income countries for the purpose of pursuing capital projects. The World Bank is the collective name for the Inte ...
to silence his criticisms of the policies which they and the IMF had pursued.
Stiglitz always had a poor relationship with Treasury Secretary Lawrence Summers
Lawrence Henry Summers (born November 30, 1954) is an American economist who served as the 71st United States secretary of the treasury from 1999 to 2001 and as director of the National Economic Council from 2009 to 2010. He also served as pres ...
. In 2000, Summers successfully petitioned for Stiglitz's removal, supposedly in exchange for World Bank President James Wolfensohn
Sir James David Wolfensohn (1 December 193325 November 2020) was an Australian-American lawyer, investment banker, and economist who served as the ninth president of the World Bank Group (1995–2005). During his tenure at the World Bank, he is ...
's re-appointment an exchange that Wolfensohn denies took place. Whether Summers ever made such a blunt demand is questionable Wolfensohn claims he would "have told him to *** himself".
Stiglitz resigned from the World Bank in January 2000, a month before his term expired. The Bank's president, James Wolfensohn, announced Stiglitz's resignation in November 1999 and also announced that Stiglitz would stay on as Special Advisor to the President, and would chair the search committee for a successor.
In this role, he continued criticism of the IMF, and, by implication, the US Treasury Department. In April 2000, in an article for ''The New Republic
''The New Republic'' is an American magazine of commentary on politics, contemporary culture, and the arts. Founded in 1914 by several leaders of the progressive movement, it attempted to find a balance between "a liberalism centered in hu ...
'', he wrote:
The article was published a week before the annual meetings of the World Bank and IMF and provoked a strong response. It proved too strong for Summers and, yet more lethally, Stiglitz's protector-of-sorts at the World Bank, Wolfensohn. Wolfensohn had privately empathised with Stiglitz's views, but this time was worried for his second term, which Summers had threatened to veto. Stanley Fischer, deputy managing director of the IMF, called a special staff meeting and informed at that gathering that Wolfensohn had agreed to fire Stiglitz. Meanwhile, the Bank's External Affairs department told the press that Stiglitz had not been fired, his post had merely been abolished.
In a September 19, 2008 radio interview, with Aimee Allison
Aimee Allison (born 1969) is the Founder of She the People, a national network elevating the political power of women of color.
She the People
In March 2018, Allison founded She the People to activate and mobilize women of color across the country ...
and Philip Maldari on Pacifica Radio's KPFA 94.1 FM in Berkeley
Berkeley most often refers to:
*Berkeley, California, a city in the United States
**University of California, Berkeley, a public university in Berkeley, California
* George Berkeley (1685–1753), Anglo-Irish philosopher
Berkeley may also refer ...
, US, Stiglitz implied that President Clinton and his economic advisors would not have backed the North American Free Trade Agreement (NAFTA) had they been aware of stealth provisions, inserted by lobbyists, that they overlooked.
Initiative for Policy Dialogue
In July 2000, Stiglitz founded the Initiative for Policy Dialogue (IPD), with the support of the Ford, Rockefeller, McArthur, and Mott Foundations and the Canadian and Swedish governments, to enhance democratic processes for decision-making in developing countries and to ensure that a broader range of alternatives are on the table and more stakeholders are at the table.
Commission on the Measurement of Economic Performance and Social Progress
At the beginning of 2008, Stiglitz chaired the , also known as the Stiglitz-Sen-Fitoussi Commission, initiated by President Sarkozy of France. The Commission held its first plenary meeting on April 22–23, 2008, in Paris. Its final report was made public on September 14, 2009.
Commission of Experts on Reforms of the International Monetary and Financial System
In 2009, Stiglitz chaired the Commission of Experts on Reforms of the International Monetary and Financial System which was convened by the President of the United Nations General Assembly "to review the workings of the global financial system
The global financial system is the worldwide framework of legal agreements, institutions, and both formal and informal economic actors that together facilitate international flows of financial capital for purposes of investment and trade finan ...
, including major bodies such as the World Bank
The World Bank is an international financial institution that provides loans and grants to the governments of low- and middle-income countries for the purpose of pursuing capital projects. The World Bank is the collective name for the Inte ...
and the IMF, and to suggest steps to be taken by Member States to secure a more sustainable and just global economic order". Its final report was released on September 21, 2009.
Greek debt crisis
In 2010, Professor Stiglitz acted as an advisor to the Greek government during the Greek debt crisis
Greece faced a sovereign debt crisis in the aftermath of the financial crisis of 2007–2008. Widely known in the country as The Crisis (Greek: Η Κρίση), it reached the populace as a series of sudden reforms and austerity measures that l ...
. He appeared on Bloomberg TV for an interview on the risks of Greece defaulting, in which he stated that he was very confident that Greece would not default. He went on to say that Greece was under "speculative attack" and though it had "short-term liquidity problems ... and would benefit from Solidarity Bonds", the country was "on track to meet its obligations".
The next day, during a BBC interview, Stiglitz stated that "there's no problem of Greece or Spain meeting their interest payments". He argued nonetheless, that it would be desirable and needed for all of Europe to make a clear statement of belief in social solidarity and that they "stand behind Greece". Confronted with the statement: "Greece's difficulty is that the magnitude of debt is far greater than the capacity of the economy to service", Stiglitz replied, "That's rather absurd".
In 2012, Stiglitz described the European austerity plans as a "suicide-pact".
Scotland
Since March 2012, Stiglitz has been a member of the Scottish Government's Fiscal Commission Working Group, which oversees the work to establish a fiscal and macroeconomic framework for an independent Scotland on behalf of the Scottish Council of Economic Advisers.
Together with Professors Andrew Hughes Hallett, Sir James Mirrlees
Sir James Alexander Mirrlees (5 July 1936 – 29 August 2018) was a British economist and winner of the 1996 Nobel Memorial Prize in Economic Sciences. He was knighted in the 1997 Birthday Honours.
Early life and education
Born in Minnigaf ...
and Frances Ruane, Stiglitz will "advise on the establishment of a credible Fiscal Commission which entrenches financial responsibility and ensures market confidence".
Labour Party
In July 2015, Stiglitz endorsed Jeremy Corbyn
Jeremy Bernard Corbyn (; born 26 May 1949) is a British politician who served as Leader of the Opposition and Leader of the Labour Party from 2015 to 2020. On the political left of the Labour Party, Corbyn describes himself as a socialist ...
's campaign
Campaign or The Campaign may refer to:
Types of campaigns
* Campaign, in agriculture, the period during which sugar beets are harvested and processed
*Advertising campaign, a series of advertisement messages that share a single idea and theme
* Bl ...
in the Labour Party leadership election. He said: "I am not surprised at all that there is a demand for a strong anti-austerity movement around increased concern about inequality. The promises of New Labour
New Labour was a period in the history of the British Labour Party from the mid to late 1990s until 2010 under the leadership of Tony Blair and Gordon Brown. The name dates from a conference slogan first used by the party in 1994, later seen ...
in the UK and of the Clintonites in the US have been a disappointment."
On September 27, 2015, it was announced that he had been appointed to the British Labour Party's Economic Advisory Committee, convened by Shadow Chancellor
The Shadow Chancellor of the Exchequer in the British Parliamentary system is the member of the Shadow Cabinet who is responsible for shadowing the Chancellor of the Exchequer. The title is given at the gift of the Leader of the Opposition a ...
John McDonnell
John Martin McDonnell (born 8 September 1951) is a British politician who served as Shadow Chancellor of the Exchequer from 2015 to 2020. A member of the Labour Party, he has been Member of Parliament (MP) for Hayes and Harlington since 1997. ...
and reporting to Labour Party Leader Jeremy Corbyn, although he reportedly failed to attend the first meeting.
Economic views
Market efficiency
For Stiglitz, there is no such thing as an invisible hand, in the sense that free markets lead to efficiency as if guided by unseen forces. According to Stiglitz:
In an interview in 2007, Stiglitz explained further:
The preceding claim is based on Stiglitz's 1986 paper, "Externalities in Economies with Imperfect Information and Incomplete Markets In economics, incomplete markets are markets in which there does not exist an Arrow–Debreu security for every possible state of nature. In contrast with complete markets, this shortage of securities will likely restrict individuals from transferr ...
",[PDF; 2.96 MB]
which describes a general methodology to deal with externalities and for calculating optimal corrective taxes in a general equilibrium context. In the opening remarks for his prize acceptance at Aula Magna, Stiglitz said:
Support for anti-austerity movement in Spain
On July 25, 2011, Stiglitz participated in the "I Foro Social del 15M" organized in Madrid
Madrid ( , ) is the capital and most populous city of Spain. The city has almost 3.4 million inhabitants and a Madrid metropolitan area, metropolitan area population of approximately 6.7 million. It is the Largest cities of the Europ ...
(Spain) expressing his support for the anti-austerity movement in Spain
The anti-austerity movement in Spain, also referred to as the 15-M Movement ( Spanish: ''Movimiento 15-M''), and the Indignados Movement, was a series of protests, demonstrations, and occupations against austerity policies in Spain that began ar ...
. During an informal speech, he made a brief review of some of the problems in Europe and in the United States, the serious unemployment rate and the situation in Greece. "This is an opportunity for economic contribution social measures", argued Stiglitz, who made a critical speech about the way authorities are handling the political exit to the crisis. He encouraged those present to respond to the bad ideas, not with indifference, but with good ideas. "This does not work, you have to change it", he said.
Criticism of rating agencies
Stiglitz has been critical of rating agencies
A credit rating agency (CRA, also called a ratings service) is a company that assigns credit ratings, which rate a debtor's ability to pay back debt by making timely principal and interest payments and the likelihood of default. An agency may ra ...
, describing them as the "key culprit" in the financial crisis, noting "they were the party that performed the alchemy that converted the securities from F-rated to A-rated. The banks could not have done what they did without the complicity of the rating agencies."
Stiglitz co-authored a paper with Peter Orszag
Peter Richard Orszag (born December 16, 1968) is the CEO of Financial Advisory at Lazard. Before June 2019, he was the firm's Head of North American M&A and Global Co-Head of Healthcare.
Orszag previously served as a Vice Chairman of Corporate ...
in 2002 titled "Implications of the New Fannie Mae and Freddie Mac Risk-Based Capital Standard" where they stated "on the basis of historical experience, the risk to the government from a potential default on GSE debt is effectively zero." However, "the risk-based capital standard ... may fail to reflect the probability of another Great Depression-like scenario."
Criticism of Trans-Pacific Partnership and Transatlantic Trade and Investment Partnership
Stiglitz warned that the Trans-Pacific Partnership
The Trans-Pacific Partnership (TPP), or Trans-Pacific Partnership Agreement, was a highly contested proposed trade agreement between 12 Pacific Rim economies, Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Sin ...
(TPP) presented "grave risks" and it "serves the interests of the wealthiest."
Stiglitz also opposed the Transatlantic Trade and Investment Partnership
The Transatlantic Trade and Investment Partnership (TTIP) was a proposed trade agreement between the European Union and the United States, with the aim of promoting trade and multilateral economic growth. According to Karel de Gucht, European ...
(TTIP) trade deal between the European Union
The European Union (EU) is a supranational political and economic union of member states that are located primarily in Europe. The union has a total area of and an estimated total population of about 447million. The EU has often been de ...
(EU) and the United States
The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country primarily located in North America. It consists of 50 states, a federal district, five major unincorporated territori ...
, and has argued that the United Kingdom
The United Kingdom of Great Britain and Northern Ireland, commonly known as the United Kingdom (UK) or Britain, is a country in Europe, off the north-western coast of the European mainland, continental mainland. It comprises England, Scotlan ...
should consider its withdrawal from the EU in the 2016 referendum on the matter if TTIP passes, saying that "the strictures
A stenosis (from Ancient Greek στενός, "narrow") is an abnormal narrowing in a blood vessel or other tubular organ or structure such as foramina and canals. It is also sometimes called a stricture (as in urethral stricture).
''Stricture' ...
imposed by TTIP would be sufficiently averse to the functioning of government that it would make me think over again about whether membership of the EU was a good idea".
Regulation
Stiglitz argues that relying solely on business self-interest as the means of achieving the well-being of society and economic efficiency is misleading, and that instead "What is needed is stronger norms, clearer understandings of what is acceptable and what is not and stronger laws and regulations to ensure that those that do not behave in ways that are consistent with these norms are held accountable".
Land value tax (Georgism)
Stiglitz argues that land value tax
A land value tax (LVT) is a levy on the value of land (economics), land without regard to buildings, personal property and other land improvement, improvements. It is also known as a location value tax, a point valuation tax, a site valuation ta ...
would improve the efficiency and equity of agricultural economies. Stiglitz believes that societies should rely on a generalized Henry George principle to finance public goods, protect natural resources, improve land use, and reduce the burden of rents and taxes on the poor while increasing productive capital formation. Stiglitz advocates taxing "natural resource rents at as close to 100 percent as possible" and that a corollary of this principle is that polluters should be taxed for "activities that generate negative externalities." Stiglitz therefore asserts that land value taxation is even better than its famous advocate Henry George
Henry George (September 2, 1839 – October 29, 1897) was an American political economist and journalist. His writing was immensely popular in 19th-century America and sparked several reform movements of the Progressive Era. He inspired the eco ...
thought.
Views on the eurozone
In a September 2016 interview Stiglitz stated that "the cost of keeping the Eurozone together probably exceeds the cost of breaking it up."
Views on free trade
Advice for the eurozone countries
In the 1990s, he wrote that ''"countries in North America and Europe should eliminate all tariffs and quotas'' (protectionist measures)". He now advises the eurozone countries to control their trade balance with Germany by means of export/ import certificates or "trade chits" (a protectionist measure).
Citing Keynesian theory, he explains that trade surpluses are harmful: ''"John Maynard Keynes
John Maynard Keynes, 1st Baron Keynes, ( ; 5 June 1883 – 21 April 1946), was an English economist whose ideas fundamentally changed the theory and practice of macroeconomics and the economic policies of governments. Originally trained in ...
pointed out that surpluses lead to weak global aggregate demand – countries running surpluses exert a "negative externality" on trading partners. Indeed, Keynes believed it was surplus countries, far more than those in deficit, that posed a threat to global prosperity; he went so far as to advocate a tax on surplus countries"''. Indeed, from the beginning of 1930, Keynes stopped believing in free trade, denounced the theory of comparative advantage (the basis of free trade) and definitively adhered to protectionism.
Stiglitz writes: ''"Germany's surplus means that the rest of Europe is in deficit. And the fact that these countries import more than they export contributes to the weakness of their economies"''. He thinks that surplus countries are getting richer at the expense of deficit countries. He notes that the euro is the cause of this deficit and that as the trade deficit declines GDP would rise and unemployment would fall: ''"The euro system means that Germany's exchange rate cannot increase compared to other euro area members. If the exchange rate were to rise, Germany would have more difficulty exporting and its economic model, based on strong exports, would cease. At the same time, the rest of Europe would export more, GDP would rise and unemployment would fall"''.
He also thinks that the rest of the world should impose a carbon-adjustment tax (a protectionist measure) on American exports that do not comply with global standard.
Advice for United States
Contrary to Keynesian theory and these analyses on the Eurozone, he argues that the United States should not rebalance the trade account, and that the country can no longer apply protectionist measures to protect or recreate the well-paying manufacturing jobs, saying: "The very Americans who have been among the losers of globalization stand to be among the losers of a reversal of globalization. History cannot be put into reverse".
On the other hand, he admits that as trade deficit declines, "GDP would rise and unemployment would fall", further stating: "...the fact that these countries are importing more than they are exporting contributes to their weak economies." He also notes that trade deficit is correlated with loss of manufacturing jobs: the increase in the "value of the dollar will lead to larger trade deficits and fewer manufacturing jobs".
Contrary to most economics historians, who argue that tariffs played only a minor if any role in the Great Depression, Stiglitz thinks that tariffs would be harmful to the United States economy today because it contributed to the Great Depression: "Following that, U.S. exports fell by some 50 percent—contributing to our Great Depression".
He denounces the "trickle-down" policies of liberalism and neoliberalism
Neoliberalism (also neo-liberalism) is a term used to signify the late 20th century political reappearance of 19th-century ideas associated with free-market capitalism after it fell into decline following the Second World War. A prominent fa ...
(''laissez-faire
''Laissez-faire'' ( ; from french: laissez faire , ) is an economic system in which transactions between private groups of people are free from any form of economic interventionism (such as subsidies) deriving from special interest groups ...
'') However, he calls for lowering trade barriers and promoting free trade (policy of deregulation of foreign trade which is part of the ''laissez-faire'' economic model).
According to him, it is not China (which has a large trade surplus) that makes "trade war", but the United States (which has a large trade deficit). He advises China to take sanctions against the United States. He warns that China could hit back at the U.S. "where hurts economically and politically" if the United States tries to raise tariffs, saying: "For example, cutbacks in purchases by China will lead to more unemployment in congressional districts that are vulnerable, influential, or both. ... China can retaliate anywhere it chooses, such as by using trade restrictions to target jobs in the congressional districts of those who support US tariffs. ... China may be more effective in targeting its retaliation to cause acute political pain. ... It's anybody's guess who can stand the pain better. Will it be the US, where ordinary citizens have already suffered for so long, or China, which, despite troubled times, has managed to generate growth in excess of 6%?"
Stiglitz does not want the United States to stop free trade. According to him, if China limits globalization, it will not hurt them, but if the United States stops with the process of free trade, it will be harmful. About China, according to him, if China depends less on economic globalization
Economic globalization is one of the three main dimensions of globalization commonly found in academic literature, with the two others being political globalization and cultural globalization, as well as the general term of globalization.
Econom ...
, it will not be negative for the country. He writes that the decline in exports from China to the U.S. may not "hurt them more than it hurt us" because "China’s government has far more control over the country’s economy than our government has over ours; and it is moving from export dependence to a model of growth driven by domestic demand." Regarding the United States, he writes the opposite and advice to apply the opposite of the Keynesian theory of trade deficits seen earlier: "Walking away from globalization may reduce our imports, but it will also reduce exports in tandem. And, almost surely, jobs will be destroyed faster than they will be created: there may even be fewer net manufacturing jobs". " heerection of barriers to trade and the movement of people and ideas more likely than not will be one in which the U.S. almost surely will lose."
In early 2017, he wrote that "the American middle class is indeed the loser of globalization
Globalization, or globalisation (English in the Commonwealth of Nations, Commonwealth English; American and British English spelling differences#-ise, -ize (-isation, -ization), see spelling differences), is the process of foreign relation ...
" (the diminution of international trade regulations as well as tariffs, taxes) and "China, with its large emerging middle class, is among the big beneficiaries of globalization". "Thanks to globalisation, in terms of purchasing-power parity, China actually has already become the largest economy in the world in September 2015". However, contrary to what he wrote earlier, he later argued in February 2017 that the fall in wages and the disappearance of well-paid jobs in the United States, are not due to free trade or globalisation, but rather are inevitable collateral damage to the march of economic progress and technological innovation: "The United States can only push for advanced manufacturing, which requires higher skill sets and employs fewer people. Rising inequality, meanwhile, will continue ...". In addition, in December 5 2017,contrary to what he wrote earlier, he wrote that the drop in wages in the United States is due to the actions of multinational companies rather than the globalisation and the trade account imbalances between countries caused by free trade: "It was an agenda written by and for large multinational companies, at the expense of workers".
In 2016, he said he believes that the economic situation of the United States is critical: "As the economists Anne Case and Angus Deaton
Sir Angus Stewart Deaton (born 19 October 1945) is a British economist and academic. Deaton is currently a Senior Scholar and the Dwight D. Eisenhower Professor of Economics and International Affairs Emeritus at the Princeton School of Public ...
showed in their study published in December 2015, life expectancy among middle-age white Americans is declining, as rates of suicides, drug use, and alcoholism increase. A year later, the National Center for Health Statistics reported that life expectancy for the country as a whole has declined for the first time in more than 20 years." ... With the incomes of the bottom 90% having stagnated for close to a third of a century (and declining for a significant proportion), the health data simply confirmed that things were not going well for swaths of the country". ?".
Green economy
Stiglitz has called for a transition to a green economy. He supported the Green New Deal
Green New Deal (GND) proposals call for public policy to address climate change along with achieving other social aims like job creation and reducing economic inequality. The name refers back to the New Deal, a set of social and economic refo ...
. In 2019, he wrote that "The Green New Deal would stimulate demand, ensuring that all available resources were used; and the transition to the green economy would likely usher in a new boom. Trump’s focus on the industries of the past, like coal, is strangling the much more sensible move to wind and solar power. More jobs by far will be created in renewable energy than will be lost in coal." Stiglitz described the climate crisis
''Climate crisis'' is a term describing global warming and climate change, and their impacts. The term and the alternative term ''climate emergency'' have been used to describe the threat of global warming to humanity (and their planet), and to u ...
as humanity's World War III
World War III or the Third World War, often abbreviated as WWIII or WW3, are names given to a hypothetical worldwide large-scale military conflict subsequent to World War I and World War II. The term has been in use since at ...
.
Books
Along with his technical economic publications (over 300 technical articles), Stiglitz is the author of books on issues from patent law to abuses in international trade.
''Whither Socialism?'' (1994)
'' Whither Socialism?'' is based on Stiglitz's Wicksell Lectures, presented at the Stockholm School of Economics
The Stockholm School of Economics (SSE; sv, Handelshögskolan i Stockholm, HHS) is a private business school located in city district Vasastaden in the central part of Stockholm, Sweden. SSE offers BSc, MSc and MBA programs, along with ...
in 1990 and presents a summary of information economics
Information economics or the economics of information is the branch of microeconomics that studies how information and information systems affect an economy and economic decisions.
One application considers information embodied in certain types ...
and the theory of markets with imperfect information and imperfect competition, as well as being a critique of both free market and market socialist approaches (see Roemer critique, op. cit.). Stiglitz explains how the neoclassical, or Walrasian model ("Walrasian economics" refers to the result of the process which has given birth to a formal representation of Adam Smith's notion of the "invisible hand", along the lines put forward by Léon Walras and encapsulated in the general equilibrium model of Arrow–Debreu), may have wrongly encouraged the belief that market socialism
Market socialism is a type of economic system involving the public, cooperative, or social ownership of the means of production in the framework of a market economy, or one that contains a mix of worker-owned, nationalized, and privately owne ...
could work. Stiglitz proposes an alternative model, based on the information economics
Information economics or the economics of information is the branch of microeconomics that studies how information and information systems affect an economy and economic decisions.
One application considers information embodied in certain types ...
established by the Greenwald–Stiglitz theorems.
One of the reasons Stiglitz sees for the critical failing in the standard neoclassical model, on which market socialism
Market socialism is a type of economic system involving the public, cooperative, or social ownership of the means of production in the framework of a market economy, or one that contains a mix of worker-owned, nationalized, and privately owne ...
was built, is its failure to consider the problems that arise from lack of perfect information and from the costs of acquiring information. He also identifies problems arising from its assumptions concerning completeness.
''Globalization and Its Discontents'' (2002)
In '' Globalization and Its Discontents'', Stiglitz argues that what are often called "developing economies" are, in fact, not developing at all, and puts much of the blame on the IMF.
Stiglitz bases his argument on the themes that his decades of theoretical work have emphasized: namely, what happens when people lack the key information that bears on the decisions they have to make, or when markets for important kinds of transactions are inadequate or don't exist, or when other institutions that standard economic thinking takes for granted are absent or flawed. Stiglitz stresses the point: "Recent advances in economic theory" (in part referring to his own work) "have shown that whenever information is imperfect and markets incomplete, which is to say always, and especially in developing countries, then the invisible hand works most imperfectly." As a result, Stiglitz continues, governments can improve the outcome by well-chosen interventions. Stiglitz argues that when families and firms seek to buy too little compared to what the economy can produce, governments can fight recessions and depressions by using expansionary monetary and fiscal policies to spur the demand for goods and services. At the microeconomic level, governments can regulate banks and other financial institutions to keep them sound. They can also use tax policy to steer investment into more productive industries and trade policies to allow new industries to mature to the point at which they can survive foreign competition. And governments can use a variety of devices, ranging from job creation to manpower training to welfare assistance, to put unemployed labor back to work and cushion human hardship.
Stiglitz argues that the IMF has done great damage through the economic policies it has prescribed that countries must follow in order to qualify for IMF loans, or for loans from banks and other private-sector lenders that look to the IMF to indicate whether a borrower is creditworthy. The organization and its officials, he argues, have ignored the implications of incomplete information, inadequate markets, and unworkable institutions all of which are especially characteristic of newly developing countries. As a result, Stiglitz argues, the IMF has often called for policies that conform to textbook economics but do not make sense for the countries to which the IMF is recommending them. Stiglitz seeks to show that these policies have been disastrous for the countries that have followed them.
''The Roaring Nineties'' (2003)
''The Roaring Nineties'' is Stiglitz's analysis of the boom and bust of the 1990s. Presented from an insider's point of view, firstly as chair of President Clinton's Council of Economic Advisors, and later as chief economist of the World Bank, it continues his argument on how misplaced faith in free-market ideology led to the global economic issues of today, with a perceptive focus on US policies.
''New Paradigm for Monetary Economics'' (2003)
''Fair Trade for All'' (2005)
In ''Fair Trade for All'', authors Stiglitz and Andrew Charlton argue that it is important to make the trading world more development friendly. The idea is put forth that the present regime of tariffs and agricultural subsidies is dominated by the interests of former colonial powers and needs to change. The removal of the bias toward the developed world will be beneficial to both developing and developed nations. The developing world is in need of assistance, and this can only be achieved when developed nations abandon mercantilist based priorities and work towards a more liberal world trade regime.
''Making Globalization Work'' (2006)
'' Making Globalization Work'' surveys the inequities of the global economy, and the mechanisms by which developed countries exert an excessive influence over developing nations. Dr. Stiglitz argues that through tariffs, subsidies, an over-complex patent system and pollution, the world is being both economically and politically destabilised. Stiglitz argues that strong, transparent institutions are needed to address these problems. He shows how an examination of incomplete markets can make corrective government policies desirable.
Stiglitz is an exception to the general pro-globalisation view of professional economists, according to economist Martin Wolf
Martin Harry Wolf (born 16 August 1946 in London) is a British journalist of Austrian-Dutch descent who focuses on economics. He is the associate editor and chief economics commentator at the ''Financial Times''.
Early life
Wolf was born in ...
.["Why Globalization Works" (Yale University Press 2004) , p. 8. Also Wolf criticizes World Bank heavily (pp. xiii–xv).] Stiglitz argues that economic opportunities are not widely enough available, that financial crises are too costly and too frequent, and that the rich countries have done too little to address these problems. ''Making Globalization Work'' has sold more than two million copies.
''Stability with Growth'' (2006)
In ''Stability with Growth: Macroeconomics, Liberalization and Development'', Stiglitz, José Antonio Ocampo
José Antonio Ocampo Gaviria (born 20 December 1952) is a Colombian writer, economist and academic who was the professor of professional practice in international and public affairs and director of the Economic and Political Development Concentra ...
(United Nations Under-Secretary-General for Economic and Social Affairs, until 2007), Shari Spiegel (Managing Director, Initiative for Policy Dialogue IPD), Ricardo Ffrench-Davis (Main Adviser, Economic Commission for Latin America and the Caribbean ECLAC
The United Nations Economic Commission for Latin America and the Caribbean, known as ECLAC, UNECLAC or in Spanish and Portuguese CEPAL, is a United Nations regional commission to encourage economic cooperation. ECLAC includes 46 member States (2 ...
) and Deepak Nayyar
Deepak Nayyar (born 1946) is an Indian economist and academician. He is a professor of economics at Jawaharlal Nehru University, New Delhi and Chairperson of the Board of Governors of Centre for the Study of Developing Societies (CSDS) New Delhi. ...
(Vice Chancellor, University of Delhi) discuss the current debates on macroeconomics, capital market liberalization and development, and develop a new framework within which one can assess alternative policies. They explain their belief that the Washington Consensus has advocated narrow goals for development (with a focus on price stability) and prescribed too few policy instruments (emphasizing monetary and fiscal policies), and places unwarranted faith in the role of markets. The new framework focuses on real stability and long-term sustainable and equitable growth, offers a variety of non-standard ways to stabilize the economy and promote growth, and accepts that market imperfections necessitate government interventions. Policy-makers have pursued stabilization goals with little concern for growth consequences, while trying to increase growth through structural reforms focused on improving economic efficiency. Moreover, structural policies, such as capital market liberalization, have had major consequences for economic stability. This book challenges these policies by arguing that stabilization policy has important consequences for long-term growth and has often been implemented with adverse consequences. The first part of the book introduces the key questions and looks at the objectives of economic policy from different perspectives. The third part presents a similar analysis for capital market liberalization.
''The Three Trillion Dollar War'' (2008)
'' The Three Trillion Dollar War'' (co-authored with Linda Bilmes
Linda J. Bilmes (born 1960) holds the Daniel Patrick Moynihan Senior Lecturer Chair in Public Policy and Public Finance at Harvard University. She is a full-time faculty member at the Harvard Kennedy School where she teaches public policy, budge ...
) examines the full cost of the Iraq War, including many hidden costs. The book also discusses the extent to which these costs will be imposed for many years to come, paying special attention to the enormous expenditures that will be required to care for very large numbers of wounded veterans. Stiglitz was openly critical of George W. Bush at the time the book was released.
''Freefall'' (2010)
In ''Freefall: America, Free Markets, and the Sinking of the World Economy'', Stiglitz discusses the causes of the 2008 recession/depression and goes on to propose reforms needed to avoid a repetition of a similar crisis, advocating government intervention and regulation in a number of areas. Among the policy-makers he criticises are George W. Bush, Larry Summers, and Barack Obama.
''The Price of Inequality'' (2012)
From the jacket: As those at the top continue to enjoy the best health care, education, and benefits of wealth, they often fail to realize that, as Joseph E. Stiglitz highlights, "their fate is bound up with how the other 99 percent live ... It does not have to be this way. In '' The Price of Inequality'' Stiglitz lays out a comprehensive agenda to create a more dynamic economy and fairer and more equal society"
The book received the Robert F. Kennedy Center for Justice and Human Rights
Robert F. Kennedy Human Rights (formerly the Robert F. Kennedy Center for Justice and Human Rights, or RFK Center) is an American 501(c)(3) nonprofit human rights advocacy organization. It was named after United States Senator Robert F. Kenned ...
2013 Book Award, given annually to the book that "most faithfully and forcefully reflects Robert Kennedy's purposes his concern for the poor and the powerless, his struggle for honest and even-handed justice, his conviction that a decent society must assure all young people a fair chance, and his faith that a free democracy can act to remedy disparities of power and opportunity."
''Creating a Learning Society: A New Approach to Growth, Development, and Social Progress'' (2014)
''Creating a Learning Society'' (co-authored with Bruce C. Greenwald) casts light on the significance of this insight for economic theory and policy. Taking as a starting point Kenneth J. Arrow's 1962 paper "Learning by Doing", they explain why the production of knowledge differs from that of other goods and why market economies alone typically do not produce and transmit knowledge efficiently. Closing knowledge gaps and helping laggards learn are central to growth and development. But creating a learning society is equally crucial if we are to sustain improved living standards in advanced countries.
''The Great Divide: Unequal Societies and What We Can Do About Them'' (2015)
From the jacket: In ''The Great Divide'', Joseph E. Stiglitz expands on the diagnosis he offered in his best-selling book ''The Price of Inequality'' and suggests ways to counter America's growing problem. Stiglitz argues that inequality is a choice the cumulative result of unjust policies and misguided priorities.
''The Euro: How a Common Currency Threatens the Future of Europe'' (2016)
From the description: "Stiglitz dismantles the prevailing consensus around what ails Europe, demolishing the champions of austerity while offering a series of plans that can rescue the continent--and the world--from further devastation." According to book review aggregator Literary Hub
Literary Hub is a daily literary website that launched in 2015 by Grove Atlantic president and publisher Morgan Entrekin, American Society of Magazine Editors Hall of Fame editor Terry McDonell, and Electric Literature founder Andy Hunter.
Conte ...
, it received pan reviews.
''People, Power and Profits: Progressive Capitalism for an Age of Discontent'' (2019)
From the description: "We all have the sense that the American economy―and its government―tilts toward big business, but as Joseph E. Stiglitz explains in his new book, People, Power, and Profits, the situation is dire. A few corporations have come to dominate entire sectors of the economy, contributing to skyrocketing inequality and slow growth. This is how the financial industry has managed to write its own regulations, tech companies have accumulated reams of personal data with little oversight, and our government has negotiated trade deals that fail to represent the best interests of workers. Too many have made their wealth through exploitation of others rather than through wealth creation. If something isn’t done, new technologies may make matters worse, increasing inequality and unemployment. Stiglitz identifies the true sources of wealth and of increases in standards of living, based on learning, advances in science and technology, and the rule of law. He shows that the assault on the judiciary, universities, and the media undermines the very institutions that have long been the foundation of America’s economic might and its democracy. Helpless though we may feel today, we are far from powerless. In fact, the economic solutions are often quite clear. We need to exploit the benefits of markets while taming their excesses, making sure that markets work for us―the U.S. citizens―and not the other way around. If enough citizens rally behind the agenda for change outlined in this book, it may not be too late to create a progressive capitalism that will recreate a shared prosperity. Stiglitz shows how a middle-class life can once again be attainable by all. An authoritative account of the predictable dangers of free market fundamentalism and the foundations of progressive capitalism, People, Power, and Profits shows us an America in crisis, but also lights a path through this challenging time."
''Measuring What Counts; The Global Movement for Well-Being'' (2019)
Stiglitz and his co-authors point out that the interrelated crises of environmental degradation and human suffering of our current age demonstrate that "something is fundamentally wrong with the way we assess economic performance and social progress." They argue that using GDP as the chief measure of our economic health does not provide an accurate assessment of the economy or the state of the world and the people living in it.
Papers and conferences
Stiglitz wrote a series of papers and held a series of conferences explaining how such information uncertainties may have influence on everything from unemployment to lending shortages. As the chairman of the Council of Economic Advisers during the first term of the Clinton Administration and former chief economist at the World Bank
The World Bank is an international financial institution that provides loans and grants to the governments of low- and middle-income countries for the purpose of pursuing capital projects. The World Bank is the collective name for the Inte ...
, Stiglitz was able to put some of his views into action. For example, he was an outspoken critic of quickly opening up financial markets in developing countries. These markets rely on access to good financial data and sound bankruptcy laws, but he argued that many of these countries didn't have the regulatory institutions needed to ensure that the markets would operate soundly.
In July 2020, Stiglitz alongside Hamid Rashid, the chief of Global Economic Monitoring at the UN Department of Economic and Social Affairs, published a report, pointing out that the quantitative easing
Quantitative easing (QE) is a monetary policy action whereby a central bank purchases predetermined amounts of government bonds or other financial assets in order to stimulate economic activity. Quantitative easing is a novel form of monetary pol ...
policy implemented by the US after the 2008 financial crisis, had "basically exported a debt bubble to developing countries".
Awards and honors
In addition to being awarded the Nobel Memorial prize, Stiglitz has over 40 honorary doctorates and at least eight honorary professorships as well as an honorary deanship.[Curriculum Vitae](_blank)
, Joseph E. Stiglitz
Stiglitz was elected to the American Academy of Arts and Sciences
The American Academy of Arts and Sciences (abbreviation: AAA&S) is one of the oldest learned societies in the United States. It was founded in 1780 during the American Revolution by John Adams, John Hancock, James Bowdoin, Andrew Oliver, a ...
in 1983, the National Academy of Sciences in 1988, and the American Philosophical Society
The American Philosophical Society (APS), founded in 1743 in Philadelphia, is a scholarly organization that promotes knowledge in the sciences and humanities through research, professional meetings, publications, library resources, and communit ...
in 1997.
In 2009, he received the Golden Plate Award of the American Academy of Achievement
The American Academy of Achievement, colloquially known as the Academy of Achievement, is a non-profit educational organization that recognizes some of the highest achieving individuals in diverse fields and gives them the opportunity to meet ...
presented by Awards Council member Archbishop Desmond Tutu
Desmond Mpilo Tutu (7 October 193126 December 2021) was a South African Anglican bishop and theologian, known for his work as an anti-apartheid and human rights activist. He was Bishop of Johannesburg from 1985 to 1986 and then Archbisho ...
at an awards ceremony at St. George's Cathedral in Cape Town, South Africa.
He received the 2010 Gerald Loeb Awards for Commentary for "Capitalist Fools and Wall Street's Toxic Message".
In 2011, he was named by '' Foreign Policy'' magazine on its list of top global thinkers. In February 2012, he was awarded the Legion of Honor, in the rank of Officer, by the French ambassador in the United States François Delattre. Stiglitz was elected a Foreign Member of the Royal Society (ForMemRS) in 2009. Stiglitz was awarded the 2018 Sydney Peace Prize
The Sydney Peace Prize is awarded by the Sydney Peace Foundation,
a non profit organisation associated with the University of Sydney. The prize promotes peace with justice and the practice of nonviolence. It aims to encourage public interest and d ...
.
Personal life
Stiglitz married Jane Hannaway in 1978 but the couple later divorced. He married for the third time on October 28, 2004 to Anya Schiffrin
Anya Schiffrin (born December 6, 1962) is the director of the Technology, Media, and Communications (TMaC) specialization at Columbia University's School of International and Public Affairs (SIPA), and a lecturer at the School of International and ...
, who works at the School of International and Public Affairs
The School of International and Public Affairs at Columbia University (SIPA) is the international affairs and public policy school of Columbia University, a private Ivy League university located in Morningside Heights, Manhattan, New York City. ...
at Columbia University
Columbia University (also known as Columbia, and officially as Columbia University in the City of New York) is a private research university in New York City. Established in 1754 as King's College on the grounds of Trinity Church in Manhatt ...
. He has four children and three grandchildren.
Selected bibliography
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**See also: Nicholas Georgescu-Roegen
Nicholas Georgescu-Roegen (born Nicolae Georgescu, 4 February 1906 – 30 October 1994) was a Romanian mathematician, statistician and economist. He is best known today for his 1971 ''The Entropy Law and the Economic Process'', in which he argu ...
and Robert Solow
Robert Merton Solow, GCIH (; born August 23, 1924) is an American economist whose work on the theory of economic growth culminated in the exogenous growth model named after him. He is currently Emeritus Institute Professor of Economics at the ...
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* Joseph E. Stiglitz, "Measuring What Matters: Obsession with one financial figure, GDP
Gross domestic product (GDP) is a monetary measure of the market value of all the final goods and services produced and sold (not resold) in a specific time period by countries. Due to its complex and subjective nature this measure is ofte ...
, has worsened people's health, happiness and the environment, and economists want to replace it", ''Scientific American
''Scientific American'', informally abbreviated ''SciAm'' or sometimes ''SA'', is an American popular science magazine. Many famous scientists, including Albert Einstein and Nikola Tesla, have contributed articles to it. In print since 1845, it ...
'', vol. 323, no. 2 (August 2020), pp. 24–31.
Video and online sources
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* Original French title ''Le monde selon Stiglitz''.
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Papers
Online access to Stiglitz published papers, at his own website.
See also
* Atkinson–Stiglitz theorem
The Atkinson–Stiglitz theorem is a theorem of public economics which states that "where the utility function is separable between labor and all commodities, no indirect taxes need be employed." Non-linear income taxation can be used by the govern ...
* List of economists
This is an incomplete alphabetical list by surname of notable economists, experts in the social science of economics, past and present. For a history of economics, see the article History of economic thought. Only economists with biographical artic ...
References
External links
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Joseph E. Stiglitz , Columbia Business School Directory
* including the Prize Lecture December 8, 2001 ''Information and the Change in the Paradigm in Economics''
an
at Research Papers in Economics
Research Papers in Economics (RePEc) is a collaborative effort of hundreds of volunteers in many countries to enhance the dissemination of research in economics. The heart of the project is a decentralized database of working papers, preprints, ...
/RePEc
Publications
at the National Bureau of Economic Research
The National Bureau of Economic Research (NBER) is an American private nonprofit research organization "committed to undertaking and disseminating unbiased economic research among public policymakers, business professionals, and the academic c ...
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Column archives
at Project Syndicate
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Of the 1%, by the 1%, for the 1%
Joseph E. Stiglitz, '' Vanity Fair'', May 2011
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Three decades of neoliberal policies have decimated the middle class, our economy, and our democracy
Joseph Stiglitz for MarketWatch. May 13, 2019.
{{DEFAULTSORT:Stiglitz, Joseph
1943 births
Living people
Nobel laureates in Economics
American Nobel laureates
20th-century American non-fiction writers
20th-century American economists
21st-century American non-fiction writers
21st-century American economists
Alumni of Fitzwilliam College, Cambridge
Academics of the University of Manchester
American anti-globalization writers
American male non-fiction writers
Amherst College alumni
American Ashkenazi Jews
Columbia University faculty
American development economists
Drummond Professors of Political Economy
Sciences Po faculty
Fellows of All Souls College, Oxford
Fellows of Gonville and Caius College, Cambridge
Fellows of the British Academy
Fellows of the Econometric Society
Foreign Members of the Royal Society
Foreign Members of the Russian Academy of Sciences
Georgist economists
Gerald Loeb Award winners for Columns, Commentary, and Editorials
Information economists
Intergovernmental Panel on Climate Change lead authors
Jewish American social scientists
Jewish American writers
Jewish American economists
Keio University faculty
Keynesians
Labour Party (UK) people
MIT School of Humanities, Arts, and Social Sciences alumni
Institute for Advanced Study visiting scholars
Members of the Pontifical Academy of Social Sciences
Members of the United States National Academy of Sciences
New Keynesian economists
People in international development
Princeton University faculty
Public economists
Stanford University Department of Economics faculty
World Bank Chief Economists
Writers about globalization
Writers from Gary, Indiana
Yale University faculty
Center for Economic and Policy Research
Institute for New Economic Thinking
National Bureau of Economic Research
American officials of the United Nations
Economists from Indiana
Officiers of the Légion d'honneur
Fellows of the American Academy of Political and Social Science
Clinton administration cabinet members
Nancy L. Schwartz Memorial Lecture speakers
Jewish American members of the Cabinet of the United States
20th-century American male writers
21st-century American male writers
Chairs of the United States Council of Economic Advisers
Members of the American Philosophical Society
Fulbright alumni