Joseph E. Stiglitz Quotes

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.

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.

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.

My teachers helped guide and motivate me; but the responsibility of learning was left with me.

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 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.

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.

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.

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

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.

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.

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.

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.

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.

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.