Joseph E. Stiglitz Quotes

The notion that every well educated person would have a mastery of at least the basic elements of the humanities, sciences, and social sciences is a far cry from the specialized education that most students today receive, particularly in the research universities.

I, like many members of my generation, was concerned with segregation and the repeated violation of civil rights. We were impatient with those (like President Kennedy) who took a cautious approach. How could we continue to countenance these injustices that had gone on so long? (The fact that so many people in the establishment seemed to do so — as they had accepted colonialism, slavery, and other forms of oppression — left a life-long mark. It reinforced a distrust of authority which I had had from childhood).

As I argued earlier, I view competition as far more important than privatization.

The answer that socialism provided to the age-old question of the proper balance between the public and the private can now, from our current historical perspective, be seen to have been wrong. But if it was based on wrong, or at least incomplete, economic theories, theories that are quickly passing into history, it was also based on ideals and values many of which are eternal. It represented a quest for a more humane and a more egalitarian society.

I have argued that simply as a matter of fairness in trade, it is intolerable for one country to provide, in effect, emission subsidies to its firms. [...] Europe must use the foundations of the international trade law we have created to force any recalcitrant country, any rogue state—including the United States—to behave responsibly.

The theory of market socialism, for the most part, was not based on an analysis of these market failures, and of the reasons why government might be able to resolve them, but rather on the naive comparison of the actual performance of market economies and the hypothesized performance of a market socialist economy with an idealized view of government. This idealization not only failed to take into account the political realities, but more important from the perspective of this chapter, failed to take into account essential economic realities.

The era of multilateral trade liberalization seems to be nearing an end (at least for a while), as well-founded disillusionment in the developing countries combines with growing protectionist sentiment in the developed world.

In short, whether for the obvious reason that in the absence of futures markets the price system cannot perform its essential coordinating role with respect to future-oriented activities, such as investments, or for the more subtle reasons just discussed, that in the absence of futures markets, extending infinitely far into the future, the market economy is likely to exhibit dynamic instabilities there is no reason to believe that even with rational expectations it will converge to the steady state; there is no presumption that markets, left to themselves, will be efficient. For advocates of market socialism, the implication of this analysis seems clear: There is a need for the kind of government control of the allocation of investment envisaged in market socialism.

At the core of the success of market economies are competition, markets, and decentralization. It is possible to have these, and for the government to still play a large role in the economy; indeed it may be necessary for the government to play a large role if competition is to be preserved. There has recently been extensive confusion over to what to attribute the East Asian miracle, the amazingly rapid growth in countries of this region during the past decade or two. Countries like Korea did make use of markets; they were very export oriented. And because markets played such an important role, some observers concluded that their success was convincing evidence of the power of markets alone. Yet in almost every case, government played a major role in these economies. While Wade may have put it too strongly when he entitled his book on the Taiwan success Governing the Market, there is little doubt that government intervened in the economy through the market.

Growing up in Gary Indiana gave me, I think, a distinct advantage over many of my classmates who had grown up in affluent suburbs. They could read articles that argued that in competitive equilibrium, there could not be discrimination, so long as there are some non-discriminatory individuals or firms, since it would pay any such firm to hire the lower wage discriminated-against individuals, and take them seriously. I knew that discrimination existed, even though there were many individuals who were not prejudiced. To me, the theorem simply proved that one or more of the assumptions that went into the theory was wrong.

The fall of Wall Street is for market fundamentalism what the fall of the Berlin Wall was for communism.

The neoclassical paradigm, through its incorrect characterization of the market economies and the central problems of resource allocation, provides a false sense of belief in the ability of market socialism to solve those resource allocation problems. To put it another way, if the neoclassical paradigm had provided a good description of the resource allocation problem and the market mechanism, then market socialism might well have been a success. The very criticisms of market socialism are themselves, to a large extent, criticisms of the neoclassical paradigm.

At the core of the failure of the socialist experiment is not just the lack of property rights. Equally important were the problems arising from lack of incentives and competition, not only in the sphere of economics but also in politics. Even more important perhaps were problems of information. Hayek was right, of course, in emphasizing that the information problems facing a central planner were overwhelming. I am not sure that Hayek fully appreciated the range of information problems. If they were limited to the kinds of information problems that are at the center of the Arrow-Debreu model consumers conveying their preferences to firms, and scarcity values being communicated both to firms and consumers then market socialism would have worked. Lange would have been correct that by using prices, the socialist economy could "solve" the information problem just as well as the market could. But problems of information are broader.

Informational constraints not only limit the ability of shareholders to control rent-seeking behavior on the part of top managers, they also limit the ability of top managers to control rent-seeking behavior on the part of their subordinates. How much of the time spent by a middle-level manager to prepare a report was absolutely necessary? To what extent was it devoted to acquiring information, of marginal value to the firm, but which would make that manager look relatively good compared to other managers? To what extent are the efforts and resources spent by a manager to cultivate a client really being directed to enhance that manager's job opportunities? Private and organizational objectives are intricately intertwined, and in many cases they are not conflicting. But at the margin they frequently are, and there seems little reason to doubt that private objectives frequently, perhaps usually, win out.

In the long run, the most important changes required to make globalization work are reforms to reduce the democratic deficit.