Economist Stiglitz Quotes

There are two visions of America a half century from now. One is of a society more divided between the haves and the have-nots, a country in which the rich live in gated communities, send their children to expensive schools, and have access to first-rate medical care. Meanwhile, the rest live in a world marked by insecurity, at best mediocre education, and in effect rationed health care―they hope and pray they don't get seriously sick. At the bottom are millions of young people alienated and without hope. I have seen that picture in many developing countries; economists have given it a name, a dual economy, two societies living side by side, but hardly knowing each other, hardly imagining what life is like for the other. Whether we will fall to the depths of some countries, where the gates grow higher and the societies split farther and farther apart, I do not know. It is, however, the nightmare towards which we are slowly marching.

The financial sector provides ample rewards for those who agree with them: lucrative consultancies, research grants, and the like. The documentary raises a question: Could this have influenced some economists’ judgments?

To allow arcane trade law, which has been negotiated with scant public scrutiny, to have this kind of power over an issue so critical to humanity’s future is a special kind of madness. As Nobel Prize–winning economist Joseph Stiglitz puts it, “Should you let a group of foolish lawyers, who put together something before they understood these issues, interfere with saving the planet?

All around the world, people have an overwhelming sense that something is broken. This is leading to record levels of populism in the United States and Europe, resurgent intolerance, and a desire to upend the existing order. The left and right cannot agree on what is wrong, but they both know that something is rotten. Capitalism has been the greatest system in history to lift people out of poverty and create wealth, but the “capitalism” we see today in the United States is a far cry from competitive markets. What we have today is a grotesque, deformed version of capitalism. Economists such as Joseph Stiglitz have referred to it as “ersatz capitalism,” where the distorted representation we see is as far away from the real thing as Disney's Pirates of the Caribbean are from real pirates. If what we have is a fake version of capitalism, what does the real thing look like? What should we have? According to the dictionary, the idealized state of capitalism is “an economic system based on the private ownership of the means of production, distribution, and exchange, characterized by the freedom of capitalists to operate or manage their property for profit in competitive conditions.

Professor Joseph Stiglitz, former Chief Economist of the World Bank, and former Chairman of President Clinton's Council of Economic Advisers, goes public over the World Bank’s, “Four Step Strategy,” which is designed to enslave nations to the bankers. I summarise this below, 1. Privatisation. This is actually where national leaders are offered 10% commissions to their secret Swiss bank accounts in exchange for them trimming a few billion dollars off the sale price of national assets. Bribery and corruption, pure and simple. 2. Capital Market Liberalization. This is the repealing any laws that taxes money going over its borders. Stiglitz calls this the, “hot money,” cycle. Initially cash comes in from abroad to speculate in real estate and currency, then when the economy in that country starts to look promising, this outside wealth is pulled straight out again, causing the economy to collapse. The nation then requires International Monetary Fund (IMF) help and the IMF provides it under the pretext that they raise interest rates anywhere from 30% to 80%. This happened in Indonesia and Brazil, also in other Asian and Latin American nations. These higher interest rates consequently impoverish a country, demolishing property values, savaging industrial production and draining national treasuries. 3. Market Based Pricing. This is where the prices of food, water and domestic gas are raised which predictably leads to social unrest in the respective nation, now more commonly referred to as, “IMF Riots.” These riots cause the flight of capital and government bankruptcies. This benefits the foreign corporations as the nations remaining assets can be purchased at rock bottom prices. 4. Free Trade. This is where international corporations burst into Asia, Latin America and Africa, whilst at the same time Europe and America barricade their own markets against third world agriculture. They also impose extortionate tariffs which these countries have to pay for branded pharmaceuticals, causing soaring rates in death and disease.

(Screening, the theory of which won enfant terrible Joe Stiglitz a share of the Nobel Prize in 2001, is the art of finding out hidden information by forcing people to act, rather than simply murmur sweet nothings.)

Where is the invisible hand? “It is often invisible because it is not here,” according to economist Joseph Stiglitz.

There is a conundrum at the heart of the efficient-markets hypothesis, often called the Grossman-Stiglitz Paradox after a seminal 1980 paper written by hedge fund manager Sanford Grossman and the Nobel laureate economist Joseph Stiglitz.22 “On the Impossibility of Informationally Efficient Markets” was a frontal assault on Eugene Fama’s theory, pointing out that if market prices truly perfectly reflected all relevant information—such as corporate data, economic news, or industry trends—then no one would be incentivized to collect the information needed to trade. After all, doing so is a costly pursuit. But then markets would no longer be efficient. In other words, someone has to make markets efficient, and somehow they have to be compensated for the work involved. This paradox has hardly held back the growth of passive investing. Many investors gradually realized that whatever academic theory one subscribes to, the cold unforgiving fact is that over time most active managers underperform their benchmarks. Even if they do beat the market, a lot of the “alpha” they produce is then often gobbled up by their fees. With his usual wit, Bogle dubbed this the “Cost Matters Hypothesis.”23 However, the truth of the Grossman-Stiglitz Paradox does raise some pertinent questions around whether markets may become less efficient as more and more investing is done through index funds.

What matters is a person’s opportunity set—the set of options she has available.7 From an economist’s perspective, this is the only thing that matters. Her opportunity set determines, indeed defines, her freedom to act.8 Any reduction in the scope of actions she can undertake is a loss of freedom.9 The language used to describe an expansion or contraction of the opportunity set makes no difference.10, 11 It makes no difference whether one induces someone to behave in a particular way by incentivizing him through rewards or punishing him through fines, even though we champion the former as “noncoercive” (praising economic systems that design clever incentive systems that induce the desired behavior) and castigate the latter as “coercive.

The Nobel Prize–winning economist Joseph Stiglitz, who was the chief economist of the World Bank at the time, called the food riots in Indonesia “the IMF Riots.” “When a nation is down and out,” Stiglitz told the London newspaper the Observer, “the IMF takes advantage and squeezes the last pound of blood out of them. They turn up the heat until finally the whole cauldron blows

as the “good” middle-class jobs—requiring a moderate level of skills, like autoworkers’ jobs—seemed to be disappearing relative to those at the bottom, requiring few skills, and those at the top, requiring greater skill levels. Economists refer to this as the “polarization” of the labor force.

Economists have a name for these activities: they call them rent seeking, getting income not as a reward to creating wealth but by grabbing a larger share of the wealth that would otherwise have been produced without their effort. (We’ll give a fuller definition of the concept of rent seeking

Economists have a name for these activities: they call them rent seeking, getting income not as a reward to creating wealth but by grabbing a larger share of the wealth that would otherwise have been produced without their effort.

Still, one could argue—and many did—that Greenspan, at least, had no business being quite so shocked. Over the years, countless people had challenged his deregulatory dogma, including (to name just a few) Joseph Stiglitz and Paul Krugman, both Nobel Prize–winning economists, and Brooksley Born, who was head of the Commodity Futures Trading Commission from 1996 to 1999. Born eventually became something of a Cassandra figure for the crisis, since she repeatedly called for regulating the market for derivatives, those ultracomplex financial products that eventually helped bring down the economy. Those calls were silenced when Greenspan, along with then-Treasury Secretary Robert Rubin and then-Securities and Exchange Commission Chair Arthur Levitt, took the extraordinary step of convincing Congress to pass legislation forbidding Born’s agency from taking any action for the duration of her term.

The protest has won the backing of prominent economists, including Joseph Stiglitz, a Columbia University academic, and Andy Haldane, chief economist at the Bank of England. Its supporters believe that the exposure to a wider range of approaches is necessary if the next generation of policy makers is to avoid the mistakes made in the run-up to the crisis. Faculties in London, Paris, New York, Boston, Budapest, Sydney and Bangalore will aim to address these complaints this academic year by road-testing a new syllabus from the CORE project, led by Wendy Carlin, a professor at University College London. The Institute for New Economic Thinking, a research group bankrolled by billionaire George Soros, has spent around $300,000 on the programme so far.

By 2008, the Nobel laureate economist Joseph Stiglitz has noted, global economic output reached a level sufficient to raise every man, woman, and child on the face of the earth above the U.S. poverty line—a very great improvement for the domestic poor and an astounding achievement for the global poor.

Nobel Prize–winning economist Joseph Stiglitz thinks we need to rethink the laissez-faire economics of Rand and Friedman: “If markets are based on exploitation, the rationale for laissez-faire disappears. Indeed, in that case, the battle against entrenched power is not only a battle for democracy; it is also a battle for efficiency and shared prosperity.

America was a “civil oligarchy” in which a tiny and extremely wealthy slice of the population was able to use its vastly superior economic position to promote a brand of politics that served first and foremost itself. The oligarchs in America didn’t rule directly, he argued, but instead used their fortunes to produce political results that favored their interests. As the left-leaning Columbia University professor Joseph Stiglitz, a Nobel Prize–winning economist, put it, “Wealth begets power, which begets more wealth.