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 United States and Europe have perfected the art of arguing for free trade while simultaneously working for trade agreements that protect themselves against imports from developing countries. [...] Western negotiators almost take it for granted that they can control what gets discussed, and determine the outcomes.

An essential commitment, which virtually all observers have emphasized, is not to subsidize enterprises that are making losses. While the standard remedy for this is "privatization," it should be recognized that this is neither necessary nor sufficient for imposing hard budget constraints. Governments in many countries have subsidized private producers (e.g., of steel), and governments in some countries have imposed hard budget constraints on government enterprises.

The central economic issues go beyond the traditional three questions posed at the beginning of every introductory text: What is to be produced? How is it to be produced? And for whom is it to be produced? Among the broader set of questions are: How should these resource allocation decisions be made? Who should make these decisions? How can those who are responsible for making these decisions be induced to make the right decisions? How are they to know what and how much information to acquire before making the decisions? How can the separate decisions of the millions of actors decision makers in the economy be coordinated?

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.

Competition is important, not only because of its ability to promote economic efficiency but also because of the zest that it gives to life. Here we encounter one of the many ambivalences that characterizes our views about market economies: Competition is good, but we have our doubts about excessive competition. We encourage cooperation within teams but competition among them. We frown upon people who are excessively competitive. Yet the competitive market environment may encourage and bring out these aspects of individuals' personalities. If ruthlessly competitive people are successful, such behavior may be imitated. At the same time those who are (excessively) cooperative may be taken advantage of, derogated as pansies. Accordingly such behavior will be discouraged.

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.

Privatization is, at best, only a partial solution. Privatizations in which vouchers are given, and there is not a recapitalization, do not address this problem at all. Privatizations in which the firm is sold are likely, in the presence of limited competition for the firm, to provide an underestimate of the true value of the firm's assets. Accordingly good performance, based on this undervaluation of the firm's assets, does not provide a true measure of the firm's efficiency.

There was an incongruity between many of the models that we were taught and the policy positions that our teachers (and we) believed in. The models seemed more consonant with free market prescriptions, though they were presented more as benchmarks rather than full characterizations.

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.

The job of the Western trade negotiators is to get a better trade deal for their country's interests—for example, gaining more market access and stronger intellectual property rights—without giving up agriculture subsidies or nontariff trade barriers. Fairness is not in the lexicon of these trade negotiators.

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.

They [<nowiki/>free market policies] were never based on solid empirical and theoretical foundations, and even as many of these policies were being pushed, academic economists were explaining the limitations of markets — for instance, whenever information is imperfect, which is to say always.

Limited liability should not be sacrosanct. Like property rights—including intellectual property—it is a creation of man, to provide appropriate incentives; when that artifice fails to fulfill its social function, it needs to be modified.

The best teachers still taught in a Socratic style, asking questions, responding to the answers with still another question. And in all of our courses, we were taught that what mattered most was asking the right question — having posed the question well, answering the question was often a relatively easy matter.