Joseph Stiglitz

Joseph Stiglitz
Born	Joseph Eugene Stiglitz (1943-02-09) February 9, 1943 Gary, Indiana, U.S.
Nationality	American
Field	Macroeconomics, public economics, information economics
School or tradition	New Keynesian economics
Alma mater	Amherst College, MIT, University of Chicago
Influences	John Maynard Keynes, Robert Solow, James Mirrlees
Influenced	Paul Krugman, Jason Furman, Stephany Griffith-Jones, Huw Dixon
Contributions	Screening Taxation Unemployment Market failure Information asymmetry Economic inequality

World Bank Chief Economist
In office 1997–2000
Preceded by	Michael Bruno
Succeeded by	Nicholas Stern
17th Chair of the Council of Economic Advisors
In office June 28, 1995 – February 13, 1997
President	Bill Clinton
Preceded by	Laura Tyson
Succeeded by	Janet Yellen
Personal details
Born	Joseph Eugene Stiglitz (1943-02-09) February 9, 1943 Gary, Indiana, U.S.
Nationality	American
Political party	Democratic
Spouse(s)	Jane Hannaway (1978–?; divorced) Anya Schiffrin (m. 2004)
Alma mater	Amherst College Massachusetts Institute of Technology

Joseph Eugene Stiglitz, ForMemRS, FBA (born February 9, 1943) is an American economist and a professor at Columbia University. He is a recipient of the Nobel Memorial Prize in Economic Sciences (2001) and the John Bates Clark Medal (1979). He is a former senior vice president and chief economist of the World Bank and is a former member and chairman of the (US president's) Council of Economic Advisers. He is known for his critical view of the management of globalization, laissez-faire economists (whom he calls "free market fundamentalists"), and some international institutions like the International Monetary Fund and the World Bank.

In 2000, Stiglitz founded the Initiative for Policy Dialogue (IPD), a think tank on international development based at Columbia University. He has been a member of the Columbia faculty since 2001, received that university's highest academic rank (university professor) in 2003, and is the co-chair of the university's Committee on Global Thought. He also chairs the University of Manchester's Brooks World Poverty Institute as well as the Socialist International Commission on Global Financial Issues and is a member of the Pontifical Academy of Social Sciences. In 2009 the President of the United Nations General Assembly Miguel d'Escoto Brockmann, 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. Since 2012 Stiglitz has been the president of the International Economic Association (IEA). He presided over the organization of the IEA triennial world congress held near the Dead Sea in Jordan in June 2014.

Based on academic citations, Stiglitz is the 4th most influential economist in the world today, and in 2011 he was named by Time magazine as one of the 100 most influential people in the world. Stiglitz's work focuses on income distribution, asset risk management, corporate governance, and international trade. He is the author of several books, the latest being The Great Divide: Unequal Societies and What We Can Do About Them (2015).

Life and career

Stiglitz was born in Gary, Indiana, to Charlotte (née Fishman), a schoolteacher, and Nathaniel David Stiglitz, an insurance salesman. From 1960 to 1963, he studied at Amherst College, where he was a highly active member of the debate team and president of the student government. He went to the Massachusetts Institute of Technology (MIT) for his fourth year as an undergraduate, where he later pursued graduate work. His undergraduate degree was awarded from Amherst College. From 1965 to 1966, he moved to the University of Chicago to do research under Hirofumi Uzawa who had received an NSF 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 – 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: he arrived at Fitzwilliam College, Cambridge as a Fulbright Scholar in 1965 and then won a Tapp Junior Research Fellowship at Gonville and Caius College. In subsequent years, he held academic positions at Yale, Stanford, Oxford, and Princeton. Stiglitz is now a professor at Columbia University, with appointments at the Business School, the Department of Economics and the School of International and Public Affairs (SIPA), and is editor of The Economists' Voice journal with J. Bradford DeLong and Aaron Edlin. He also gives classes for a double-degree program between Sciences Po Paris and École Polytechnique in 'Economics and Public Policy'. He has chaired The Brooks World Poverty Institute at the University of Manchester since 2005. Stiglitz is a New-Keynesian economist.

In addition to making numerous influential contributions to microeconomics, Stiglitz has played a number of policy roles. He served in the Clinton administration as the chair of the President's Council of Economic Advisors (1995 – 1997). At the World Bank, he served as senior vice-president and chief economist (1997 – 2000), in the time when unprecedented protest against international economic organizations started, most prominently with the Seattle WTO meeting of 1999. He was fired by the World Bank for expressing dissent with its policies. He was a lead author for the Intergovernmental Panel on Climate Change, which received the Nobel Peace Prize in 2007.

He is a member of Collegium International, an organization of leaders with political, scientific, and ethical expertise whose goal is to provide new approaches in overcoming the obstacles in the way of a peaceful, socially just and an economically sustainable world. He is also a member of the scientific committee of the Fundacion IDEAS, a Spanish think tank.

Stiglitz has advised American president Barack Obama, but has also been sharply critical of the Obama Administration's financial-industry rescue plan. Stiglitz said that 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 (Spain) expressing his support to the 2011 Spanish protests.

Stiglitz was the president of the International Economic Association from 2011–2014.

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

Stiglitz at a conference in Mexico in 2009

Information asymmetry

Stiglitz's most famous research was on screening, 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 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.

Before the advent of models of imperfect and asymmetric information, the traditional neoclassical economics literature had assumed that markets are efficient except for some limited and well defined market failures. More recent work by Stiglitz and others reversed that presumption, to assert that it is only under exceptional circumstances that markets are efficient. Stiglitz has shown (together with Bruce Greenwald) that "whenever markets are incomplete and/or information is imperfect (which are true in virtually all economies), even competitive market allocation is not constrained Pareto efficient". In other words, they addressed "the problem of determining when tax interventions are Pareto-improving. The approach indicates that such tax interventions almost always exist and that equilibria in situations of imperfect information are rarely constrained Pareto optima." Although these conclusions and the pervasiveness of market failures do not necessarily warrant the state intervening broadly in the economy, it makes clear that the "optimal" range of government recommendable interventions is definitely much larger than the traditional "market failure" school recognizes. 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:

Whenever there are "externalities" – where the actions of an individual have impacts on others for which they do not pay or for which they are not compensated – markets will not work well. But recent research has shown that these externalities are pervasive, whenever there is imperfect information or imperfect risk markets – that is always. The real debate today is about finding the right balance between the market and government. Both are needed. They can each complement each other. This balance will differ from time to time and place to place.

In an interview in 2007, Stiglitz explained further:

The theories that I (and others) helped develop explained why unfettered markets often not only do not lead to social justice, but do not even produce efficient outcomes. Interestingly, there has been no intellectual challenge to the refutation of Adam Smith's invisible hand: individuals and firms, in the pursuit of their self-interest, are not necessarily, or in general, led as if by an invisible hand, to economic efficiency.

The preceding claim is based on Stiglitz 1986 paper, "Externalities in Economies with Imperfect Information and Incomplete Markets"., which describes a general methodology to deal with externalities and for calculating optimal corrective taxes in a general equilibrium context. In it he considers a model with households, firms and a government.

Households maximize a utility function $u^{h}(x^{h}, z^{h})$, where $x^{h}$ is the consumption vector and $z^{h}$ are other variables affecting the utility of the household (ex:pollution). The budget constraint is given by $x^{h}_{1}+q \cdot \bar{x}^{h}\leq I^{h}+\sum a^{hf} \cdot \pi^{f}$, where q is a vector of prices, a^hf the fractional holding of household h in firm f, π^f the profit of firm f, I^h a lump sum government transfer to the household. The consumption vector can be split as $x^{h}=\left( x^{h}_{1}, \bar{x}^{h} \right)$.

Firms maximize a profit $\pi^{f}=y^{f}_{1}+p\cdot \bar{y}_{1}$, where y^f is a production vector and p is vector of producer prices, subject to $y^{f}_{1}-G^{f}(\bar{y}^{f}, z^{f}) \leq 0$, G_f a production function and z^f are other variables affecting the firm. The production vector can be split as $y^{f}=\left( y^{f}_{1}, \bar{y}^{f} \right)$.

The government receives a net income $R=t \cdot\bar{x}-\sum I^{h}$, where t=(q-p) is a tax on the goods sold to households.

It can be shown that in general the resulting equilibrium is not efficient.

Proof

It is worth keeping in mind that an equilibrium for the model may not necessarily exist. If it exists and there are no taxes (Ih=0, ∀h), then demand equals supply, and the equilibrium is found by: $\sum \bar{x} ^{h} (q,I,z) - \sum \bar{y}^{f}(p,z)=\bar{ x } (q,I,z) - \sum \bar{y}^{f}(p,z)=0$ Let's use $\frac{\partial E^{h}}{\partial q}=E^{h}_{q}$ as a simplifying notation, where $E^{h}\left( q, z^{h}, u^{h} \right)$ is the expenditure function that allows the minimization of household expenditure for a certain level of utility. If there is a set of taxes, subsidies, and lump sum transfers that leaves household utilities unchanged and increase government revenues, then the above equilibrium is not Pareto optimal. On the other hand, if the above non taxed equilibrium is Pareto optimal, then the following maximization problem has a solution for t=0: $\begin{align} &\underset{t,I}{\operatorname{maximize}}& & R = t \cdot \bar{ x } - \sum I^{h} \\ &\operatorname{subject\;to} & & I^{h}+\sum a^{hf} \pi ^{f} =E^{h} (q,z^{h}; \bar{u}^{h}) \\ \end{align}$ This is a necessary condition for Pareto optimality. Taking the derivative of the constraint with respect to t yields: $\frac{dI^{h}}{dt}+\sum a^{hf}\left( \pi^{f}_{z} \frac{dz^{f}}{dt}+\pi^{f}_{P} \frac{dp}{dt} \right)=E^{h}_{q} \frac{dq}{dt}+E^{h}_{z} \frac{dz^{h}}{dt}$ Where $\pi^{f}_{z}=\frac{\partial \pi^{f}_{*}}{\partial z^{f}}$ and $\pi^{f}_{*}(p,z^{f})$ is the firm's maximum profit function. But since q=t+p, we have that dq/dt=IN-1+dp/dt. Therefore, substituting dq/dt in the equation above and rearranging terms gives: $E^{h}_{q}+\left( E^{h}_{q} - \sum a^{hf} \pi^{f}_{P} \right)\frac{dp}{dt}=\frac{dI^{h}}{dt}+\left\{ \sum a^{hf} \pi^{f}_{z} \frac{dz^{f}}{dt} -E^{h}_{z} \frac{dz^{h}}{dt} \right\}$ Summing over all households and keeping in mind that $\sum a^{hf}=1$ yields: $\sum E^{h}_{q}+\left(\sum E^{h}_{q} - \sum \pi^{f}_{P} \right)\frac{dp}{dt}=\sum \frac{dI^{h}}{dt}+\left\{\sum \pi^{f}_{z} \frac{dz^{f}}{dt} -\sum E^{h}_{z} \frac{dz^{h}}{dt} \right\}$ By the envelope theorem we have: $\widehat{ x }^{h}_{k}(q;z^{h},u^{h}) = \left. \frac{\partial E^{h}}{\partial q}\right|_{z^{h},u^{h}}$ $\left. \frac{\partial \pi^{f}_{*}}{\partial p_{k_{1}}}\right|_{z^{f}}=y^{f}_{k}$;∀k This allows the constraint to be rewritten as: $\bar{x} + \left( \bar{ x } - \bar{ y } \right)\frac{dp}{dt}=\sum\frac{dI^{h}}{dt}+\left( \sum\pi^{f}_{z}\frac{dz^{f}}{dt} - \sum E^{h}_{z} \frac{dz^{h}}{dt} \right)$ Since $\bar{x}=\bar{y}$: $\sum \frac{dI^{h}}{dt}= \bar{ x } - \left( \sum \pi^{f}_{z} \frac{dz^{f}}{dt} - \sum E^{h}_{z} \frac{dz^{h}}{dt} \right)$ Differentiating the objective function of the maximization problem gives: $\frac{dR}{dt}= \bar{ x } + \frac{d\bar{x}}{dt} \cdot t - \sum \frac{dI^{h}}{dt}$ Substituting $\sum \frac{dI^{h}}{dt}$ from the former equation in to latter equation results in: $\frac{dR}{dt}= \frac{d\bar{x}}{dt} \cdot t +(\sum \pi ^{f}_{z} \frac{dz^{f}}{dt} - \sum E^{h}_{z} \frac{dz^{h}}{dt}) =\frac{d\bar{x}}{dt} \cdot t +(\Pi^{t} - B^{t})$ Recall that for the maximization problem to have a solution a t=0: $\frac{dR}{dt} = \left( \Pi^{t} - B^{t} \right) = 0$ In conclusion, for the equilibrium to be Pareto optimal dR/dt must be zero. Expect for the special case where ∏ and B are equal, in general the equilibrium will not be Pareto optimal, therefore inefficient.

In the opening remarks for his prize acceptance "Aula Magna", Stiglitz said:

I hope to show that Information Economics represents a fundamental change in the prevailing paradigm within economics. Problems of information are central to understanding not only market economics but also political economy, and in the last section of this lecture, I explore some of the implications of information imperfections for political processes.

Shapiro-Stiglitz efficiency wage model

Main article: Shapiro–Stiglitz theory

See also: Efficiency wages

In the Shapiro-Stiglitz model of efficiency wages, workers are paid at a level that dissuades shirking. This prevents wages from dropping to market clearing levels. Full employment cannot be achieved because workers would shirk if they were not threatened with the possibility of unemployment. Because of this, the curve for the no-shirking condition (labeled NSC) goes to infinity at full employment.

Stiglitz also did research on efficiency wages, 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. The 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:

1. Unlike other forms of capital, humans can choose their level of effort.
2. 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:

1. 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'.
2. 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.

1. Each firm employs too few workers because it faces private cost of hiring rather than the social cost – which is equal to and in all cases. 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)
2. 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 theorems

While the mathematical validity of Stiglitz et al. theorems are not in question, their practical implications in political economy and their application in real life economic policies have been subject to disagreement and debate. Stiglitz himself has evolved his political-economic discourse over time.

Once incomplete and imperfect information are introduced, Chicago-school defenders of the market system cannot sustain descriptive claims of the Pareto efficiency of the real world. Thus, Stiglitz's use of rational-expectations equilibrium assumptions to achieve a more realistic understanding of capitalism than is usual among rational-expectations theorists leads, paradoxically, to the conclusion that capitalism deviates from the model in a way that justifies state action – socialism – as a remedy.

The effect of Stiglitz's influence is to make economics even more presumptively interventionist than Samuelson preferred. Samuelson treated market failure as the exception to the general rule of efficient markets. But the Greenwald-Stiglitz theorem posits market failure as the norm, establishing "that government could potentially almost always improve upon the market's resource allocation." And the Sappington-Stiglitz theorem "establishes that an ideal government could do better running an enterprise itself than it could through privatization" (Stiglitz 1994, 179).

Objections to the wide adoption of positions suggested by Stiglitz's discoveries do not come from economics itself, but mostly from political scientists, especially in the field of sociology. 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 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 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 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 to the market economy it unveiled failures of the countries that had followed the International Monetary Fund (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 U.S. Treasury had put enormous pressure on the World Bank 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. In 2000, Summers successfully petitioned for Stiglitz's removal, supposedly in exchange for World Bank President James Wolfensohn'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 fuck 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.

Joseph E. Stiglitz said today [Nov. 24, 1999] that he would resign as the World Bank's chief economist after using the position for nearly three years to raise pointed questions about the effectiveness of conventional approaches to helping poor countries.

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, he wrote:

They’ll say the IMF is arrogant. They’ll say the IMF doesn’t really listen to the developing countries it is supposed to help. They’ll say the IMF is secretive and insulated from democratic accountability. They’ll say the IMF's economic ‘remedies’ often make things worse – turning slowdowns into recessions and recessions into depressions. And they’ll have a point. I was chief economist at the World Bank from 1996 until last November, during the gravest global economic crisis in a half-century. I saw how the IMF, in tandem with the U.S. Treasury Department, responded. And I was appalled.

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 and Philip Maldari on Pacifica Radio's KPFA 94.1 FM in Berkeley, California, 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 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.

Main article: Initiative for Policy Dialogue

Commission on the Measurement of Economic Performance and Social Progress

At the beginning of 2008, Stiglitz chaired the Commission on the Measurement of Economic Performance and Social Progress, 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

Stiglitz at the World Economic Forum Annual Meeting in Davos, 2009.

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, including major bodies such as the World Bank 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. 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 is a member of the Scottish Government’s Fiscal Commission Working Group, which oversees the work to establish a fiscal and macro economic framework for an independent Scotland on behalf of the Scottish Council of Economic Advisers.

Together with Professors Andrew Hughes Hallett, Sir James Mirrlees and Frances Ruane Stiglitz will "advise on the establishment of a credible Fiscal Commission which entrenches financial responsibility and ensures market confidence."

The Labour Party

On September 27, 2015, Stiglitz was appointed to the Economic Advisory Committee for the Labour Party of Great Britain by the Shadow Chancellor, John McDonnell. He will report directly to Labour leader Jeremy Corbyn.

Economic views

Support for anti-austerity movement in Spain

On July 25, 2011, Stiglitz participated to the "I Foro Social del 15M" organized in Madrid (Spain) expressing his support for the anti-austerity movement in Spain. 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, 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 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

See also: Trans-Pacific Partnership § Response

Stiglitz warned that the Trans-Pacific Partnership presented "grave risks" and it "serves the interests of the wealthiest."

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".

Books

Along with his technical economic publications (he has published over 300 technical articles), Stiglitz is the author of books on issues from patent law to abuses in international trade.

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. With his signature blend of clarity and passion, Stiglitz argues that inequality is a choice—the cumulative result of unjust policies and misguided priorities.

Creating a Learning Society: A New Approach to Growth, Development, and Social Progress

Creating a Learning Society, (co authored with Bruce C. Greenwald), cast 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 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 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."

Freefall (2010)

Main article: Freefall: America, Free Markets, and the Sinking of the World Economy

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 Three Trillion Dollar War (2008)

The Three Trillion Dollar War (co-authored with Linda Bilmes) 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.

Stability with Growth

In Stability with Growth: Macroeconomics, Liberalization and Development, Stiglitz, José Antonio Ocampo (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) and Deepak Nayyar (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.

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. 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.

Fair Trade for All

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 needs of assistance, and this can only be achieved when developed nations abandon mercantilist based priorities and work towards a more liberal world trade regime.

The Roaring Nineties (2003)

The Roaring Nineties is Stiglitz' 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.

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 complains bitterly 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.

Whither Socialism? (1994)

Whither Socialism? is based on Stiglitz's Wicksell Lectures, presented at the Stockholm School of Economics in 1990 and presents a summary of information economics 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 could work. Stiglitz proposes an alternative model, based on the information economics 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 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.

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, 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.

Awards and honours

In addition to being awarded the Nobel prize, Stiglitz has over 40 honorary doctorates and at least eight honorary professorships, as well as an honorary deanship.

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.

Personal life

Stiglitz married Jane Hannaway in 1978; the couple later divorced. He got married, for the third time, on October 28, 2004 to Anya Schiffrin, who works at the School of International and Public Affairs at Columbia University. He has four children, Siobhan, Michael, Edward (Jed), and Julia, and three grandchildren.

Selected bibliography

Books

• (Reprinted 2005.)

Also as:

Book chapters

• Pdf version.

Selected scholarly articles

1970-1979

1980-1989

• Pdf version.

1990-1999

See also: Nicholas Georgescu-Roegen and Robert Solow

• Pdf version.

Also as:

2000-2009

2010 onwards

• Pdf version.

Articles in popular press

various articles from 2001 onwards.

See also:

• Non-subscription version.

Review of the book:

Video and online sources

• Five part series on two DVD discs.
• Original French title Le monde selon Stiglitz.

Book details:

Papers

• Online access to Stiglitz published papers, at his own website.

See also

• List of economists
• Atkinson-Stiglitz theorem

External links

• josephstiglitz.com
• Joseph E. Stiglitz | Columbia Business School Directory
• Information and the Change in the Paradigm in Economics 2001 lecture at NobelPrize.org
• Profile and Papers at Research Papers in Economics/RePEc
• Publications at the National Bureau of Economic Research
• Column archives at Project Syndicate
• Appearances on C-SPAN
• Joseph Stiglitz at the Internet Movie Database
• Works by or about Joseph Stiglitz in libraries (WorldCat catalog)
• Joseph Stiglitz collected news and commentary at The New York Times
• Of the 1%, by the 1%, for the 1%, Joseph E. Stiglitz, Vanity Fair, May 2011

Political offices
Preceded by Laura Tyson	Chairman of the Council of Economic Advisers 1995–1997	Succeeded by Janet Yellen
Diplomatic posts
Preceded by Michael Bruno	World Bank Chief Economist 1997–2000	Succeeded by Nicholas Stern

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