Joseph E. Stiglitz Quotes

The standard neoclassical model the formal articulation of Adam Smith's invisible hand, the contention that market economies will ensure economic efficiency provides little guidance for the choice of economic systems, since once information imperfections (and the fact that markets are incomplete) are brought into the analysis, as surely they must be, there is no presumption that markets are efficient.

The top 1 percent have the best houses, the best educations, the best doctors, and the best lifestyles, but there is one thing that money doesn’t seem to have bought: an understanding that their fate is bound up with how the other 99 percent live. Throughout history, this is something that the top 1 percent eventually do learn. Too late.

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.

One of the reasons that basic research is advanced most by not resorting to intellectual property is that while doing so would have questionable benefits, the costs are apparent. [...] Interestingly, even in software, this system of open collaboration has worked. Today we have the Linux computer operating system, which is also based on the principle of open architecture.

At the same time I have noted that some of the differences between the public and private sector may have been exaggerated they are differences among the activities being pursued, not differences of the sector within which they are pursued. Private sector organizations face incentive (principal-agent) problems no less than do public organizations.
Some of the differences are not innate but are more a consequence of common practice. The most important of these is the absence of competition and the high degree of centralization. Government organizations no less than private organizations dislike competition. The difference is the government has the power to forbid competition, which private organizations do not and indeed government sees one of its roles as curbing unfair practices aimed at reducing competition.

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.

In debate, one randomly was assigned to one side or the other. This had at least one virtue — it made one see that there was more than one side to these complex issues.

We need to distinguish between incentives at the organizational level and at the individual level, though some of the problems in designing incentive structures are common to both. We need to ask how, for the kinds of activities the public sector engages in, the organization is rewarded for "success" or punished for lack of it, and how individuals are similarly rewarded and punished.

By changing the locus of caring and responsibility from the individual to the government not only for the needy, but for oneself, one's parents, one's children we change society and we change ourselves. Here again we see a certain irony: Attempts to improve society by having the government undertake a greater role in redistribution, may ultimately through their effects on individuals and the nature of the social contract have more ambiguous consequences.

The natural resource curse is not fate; it is choice. The exploitation of natural resources is an important part of globalization today, and in some ways the failures of the resource-rich developing countries are emblematic of globalization's failures.

Thus the first objective of state economic policy is to ensure competition. This needs to be taken into account in the process of privatization or reorganizing state enterprises, as well as in the laws allowing the formation of firms, cooperatives, and partnerships. The government must take actions to minimize the barriers to entry.

There must have been something in the air of Gary that led one into economics: the first Nobel Prize winner, Paul Samuelson, was also from Gary, as were several other distinguished economists... Certainly, the poverty, the discrimination, the episodic unemployment could not but strike an inquiring youngster: why did these exist, and what could we do about them.

New technologies (reinforced by new trade rules) are enhancing the market power of incumbent, dominant firms, such as Microsoft, which are all from the developed world; for the first time, in a key global industry, there is a near-global monopolist.

Perhaps the most successful global monopoly is Microsoft, which has succeeded in gaining global market power not only in PC operating systems but in key applications such as browsers. [...] Microsoft's monopoly power leads not only to higher prices but to less innovation. [...] The failure to develop a global approach to global cartels and monopolies is yet another instance of economic globalization outpacing political globalization.

Once I undertook the analysis of a problem, I often looked at it from a variety of perspectives. I approached the problem as a series of thought experiments — unlike many other sciences, we typically cannot do actual experiments.