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So, does this mean that after two posts more or less bashing Stiglitz, he is now not quite so bad?

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If you read my posts, not the commentators, I don't bash Stiglitz, I am asking questions about Stiglitz. I consider Stiglitz the great economic theorist counter to my priors of my formative years as an economist (1980s).

So I never view myself as engaged in Stiglitz bashing, but instead hopefully in Stiglitz engaging.

I do think he confuses sometimes popular writing with necessarily political ideology, so I don't think he is as good a public intellectual as say Milton Friedman --- whose scientific work and popular work were not so divorced.

At least that is how I read the record.


Point taken, Pete.


We should be worried about the rule of experts, including economic experts. If experts respond to incentives in more or the less the way other people do, then there is a sort of public choice theory of experts, which we might call "information choice." (The expert must choose what information to share.) The analogy to the theory of government failure would be a theory of "expert failure." I think the liberal tradition of Hume and Smith is anti-expert in some sense and we should not forsake that part of the tradition. Indeed, the opposite of this sort of anti-expert view would be some sort of “progressive” vision, which, presumably, most readers of CoordinationProblem would reject. I use the terms “information choice” and “expert failure” in a paper forthcoming in Advances in Austrian Economics. The volume is devoted to experts, including economists as experts. I think the problem of economists as experts is important and one that we should give more attention to.


This symbiotic relationship between economists in the political arena and in the financial (and, more generally the corporate business) sector is indicative of the nature and workings of the Interventionist State.

Ludwig von Mises captured essential elements in this relationship between business and government in a piece that he penned in 1932, as the era of the Wiemar Republic was drawing to a close, just before the epoch of National Socialism in Germany was about to begin:

"In the Interventionist State it is no longer of crucial importance for the success of an enterprise that the business should be managed in a way that it satisfies the demands of consumers in the best and least costly manner. It is far more important that one has 'good relationships' with the political authorities so that the interventions work to the advantage and not the disadvantage of the enterprise.

"A few marks more tariff protection for the products of the enterprise and a few marks less tariff for the raw materials used in the manufacturing process can be of far more benefit to the enterprise than the greatest care in managing the business . . . To have 'connections' becomes more important than to produce well and cheaply.

"So the leadership positions within enterprises are no longer achieved by men who understand how to organize companies and to direct production in the way the market situation demands, but by men who are well thought of 'above' and 'below', men who understand how to get along well with the press and all the political parties . . . so that they and their company give no offense. It is that class of general directors that negotiate far more often with state functionaries and party leaders than with those from whom they buy or whom to whom they sell. . .

"Since it is a question of obtaining favors for these enterprises, their directors must repay the politicians with favors. In recent years, there have been relatively few large enterprises that have not had to spend very considerable sums for various undertakings in spite of it being clear from the start that they yield no profit. But in spite of the expected loss it had to be done for political reasons. Let us not even mention contributions for purposes unrelated to business -- for campaign contributions, public welfare organizations, and the like . . ."

(Ludwig von Mises, 'The Myth of the Failure of Capitalism' [1932] in Richard M. Ebeling, ed., "Selected Writings of Ludwig von Mises," Vol. 2: 'Between the Two World Wars: Monetary Disorder, Interventionism, Socialism, and the Great Depression' (Liberty Fund, 2003) pp. 188-189)

People like Rubin, Stigliz and Orszag have mastered the "art" of combining ideological paternalism and arrogance with self-interested goals of power and wealth.

From the point-of-view of any friend of liberty, they are contemptible. They are Adam Smith's "man of system" who wishes to move human beings around as if they were pawns on the "great chessboard of society," and all the time doing very well for themselves in the process.

Richard Ebeling

Thanks to Richard for the very timely Mises quote, which deserves wide circulation. One oberves that big business, especially big finance, flourishes as government grows.

Just today, Jeffrey Immelt, CEO of GE, told the US Chamber of Commerce that businesses should stop complaining about government. Why would GE complain, given all its government contracts, its investment in "green" technology, etc.?


When did Stiglitz go to Wall Street, please?


I don't think we need to arrange a "benefit" for Stiglitz, even if he has never followed a Wall Street route in his professional activities.

He makes lots of money as the Nobel Laureate who has shown the "logic" of market failures and the need for government regulation, income redistribution, and larger and larger "stimulus" packages.

His polemical distortions of pro-market positions and his misinterpretations of historical and current events are all used by him to advance a broad Statist agenda.

I have little respect for him, or those like him.

Richard Ebeling

Richard's quote illustrates something else:

Say what you want about Crazy Ol' Ayn, she knew who to borrow her economics from. That Mises extract is pretty much Rand's "the aristocracy of pull" right down to the details.


Of course you are right that Joe S. makes plenty of money as an NP winner, blah blah, one of the more deserving frankly out of the recent batches. But, he has not played the games that some of these others have, and, Pete, who has put him up for personal ridicule, well, this is becoming a public embarrassment. Tell us when he went to Wall Street. And, Dick, this is serious, not a moment for mindless ideogical ranting.

Who said he went to Wall Street? Stiglitz makes some public statements which attract some strong reaction, but this blog post is not about those.

Here is what I read:

"In the narrative of the article, it is a choice between two DC mentors to Orszag: Bob Rubin or Joe Stiglitz. Orszag has ultimately followed the Rubin path, which embraces the revolving door between DC and Wall Street."

Where does it says that Stiglitz went to Wall Street? And why are you so personal invested in this?

Stiglitz was one of the bought economists procured by Fannie Mae -- Fannie Mae bragged that they had bought every economist who could plausibly testify before Congress.

My understanding is that economists do ok at the World Bank & IMF -- including a blind eye turned to behavior at the IMF which goes beyond what is allowed by U.S. law for those who care to take advantage of that kind of thing. Power, prestige, privileges, world travel, status, well above mean salaries --- yes, lets cry crocodile tears for joe Stiglitz.

The idea that economists aren't compromised or shaped by the draw and demands of powerful institutions recquires the assumption the economists aren't human.

All too cleary these economists are human.


I have much respect for you, but we are now at a very serious moment in economic history. I suggest that you avoid making false statements about individuals. You are a serious intellectual. Please be careful now, lots of bad bs is coming down, and JS is not responsible.


Please learn how to read. Neither I nor Pete B. suggested that JS went to WS. Get real.


I have much respect for you, even though you idiotically threw me off your little "Austrian list" some time ago for complaining about the disgusting nature of Ralph Raico's vomitorous discutations about WW II on your list (oh, please please nobody sue the Holocaust deniers, and, of course, Chruchill and FDR were so awful not to understand dear old Hitler, etc.). LvMI completely lost credibility by supporting this excuse for an "intellectual," whom Greg still salivates over as someone anybody should take seriously. Greg, time for a time out for you, yeah, some of us keep track of people falling into utter hypocrisy like you. Sorry, but you need a serious rest and reboot.



"Tell us when he went to Wall Street"

You asked that two times. I could not find that statement anywhere, so I had to ask where you've read it. If neither you, nor Pete B. suggested etc., who did and where in this discussion?

You seam angry, sorry for offending you.


Now, Professor Ebeling said this:

"People like Rubin, Stigliz and Orszag have mastered the "art" of combining ideological paternalism and arrogance with self-interested goals of power and wealth.

From the point-of-view of any friend of liberty, they are contemptible. They are Adam Smith's "man of system" who wishes to move human beings around as if they were pawns on the "great chessboard of society," and all the time doing very well for themselves in the process."

This describes pretty well Stiglitz's attitude: socialism, the state knows better, etc. I don't read anywhere that Stiglitz went to Wall Street. But he is guilty of supporting state intervention on a very large scale. Wall Street doesn't even need to hire the guy, he would support them out principle: castigate them as evil people, while his prescriptions would help them. It is true, it is not a direct support, but it would have the same result.

article in fit quite interesting to read so that adds new knowledge to my

Whoa, Barkley. Where and how did Pete hold up Stiglitz for "personal ridicule"? Yes, he said Stiglitz cannot call himself a dissenter. He also said, however, "But I think Stiglitz is capturing something, rather than just trying to be fashionably chic, and that is the difference between the mainstream in a scientific community (a sociological concept) and the mainline teachings of the discipline of economics from Adam Smith to J. B. Say to F. A. Hayek and beyond. " So he is taking Stiglitz serious and *not* stooping to personal ridicule.

I do share your dismay at seeing several commenters merely disparage Stiglitz without seeming to recognize that he is a serious guy who must be engaged as a serious guy. They should follow Pete's example in recognizing that Stiglitz is "the leading economic mind of the current generation." As you suggest, we must all be serious about our economic arguments because the stakes are high. To quote Isreal Kirzner, "Economics is deadly serious. It's a matter of life and death."


Physician heal thyself.

You could use to tone down the rhetoric here too. Richard's argument is a serious one and well in-bounds. You're welcome to disagree (and with Greg too), but let's keep the personal edge out of it if you would please.

"Crazy Ol' Ayn" But this is out of bounds.


In the May 2011 issue of "Vanity Fair" Joseph Siglitz has an article entitled, "Of the 1%, by the 1%, for the 1%."

He says at one point:

"Virtually all U.S. senators, and most of the representatives in the House, are members of the top 1 percent when they arrive, are kept in office by money from the top 1 percent, and know that if they serve the top 1 percent well they will be rewarded by the top 1 percent when they leave office."

Now, from a classical liberal point-of-view (and in the context of the quote from Mises that I used in an earlier comment, above) there is, in the Interventionist State, a lot of truth in what Stiglitz says in this passage.

But, then, he goes on to say:

"The rules of economic globalization are likewise designed to benefit the rich: they encourage competition among countries for business, which drives down taxes on corporations, weakens health and environmental protections, and undermines what used to be viewed as the 'core' labor rights, which include the right to collective bargaining. Imagine what the world might look like if the rules were designed instead to encourage competition among countries for workers. Governments would compete in providing economic security, low taxes on ordinary wage earners, good education, and a clean environment—things workers care about. But the top 1 percent don’t need to care."

Clearly, for Stiglitz, "business" is mostly what Marx and Marxists claimed it was: exploiters of the domestic workers and economic imperialists who impose an increasing misery on the workers of foreign lands. Through what? Imposing global competition to attract foreign investment into developing nations.

Is there any mention that foreign investment increases the savings pools of those developing nations to accelerate capital formation? Or the this, over time, raises the marginal productivity of workers in those foreign lands? Or that foreign investments adds to and increases the market demand in those countries for workers -- which also, over time, tends to push up wages? Or that this foreign investment -- by introducing workers to more modern means of production -- improves the "human capital" of those workers through acquired knowledge and experience working in businesses started up or invested in by Western "business"?

Doe not foreign investment help improve a developing country's GDP over time, so that society can be wealthier to afford more and better education (public and/or private)? Or for the society to have a sufficient improvement in average standards of living that the marginal utility of necessities will have fallen far enough that people can decide that "at the margin" its worth it, at some point, to trade off some increment of greater material wealth to have a "cleaner environment"?

Where is Stiglitz's microeconomic "thinking cap"?

If he represents the "best and brightest" of the contemporary economics profession when the subject-matter is applied to policy issues, well we have a problem.

Richard Ebeling

I don't much remember it, but I can't possibly have "thrown you off" for complaining about Ralph Raico & what he's written about WWII. My recollection is that our dispute had to do with falsehoods said about me in another forum. In any case, it's water under the bridge & I don't care to try to recall any of it.

My point about economists is a serious one identifying a real causal process, with causal consequences for the content of econ "science" & policy production more generally.

I'm guessing you've read Larry White's paper on the extensive role of the Fed in the life of the profession of macroeconomics in America.

This is a real issue.

There are other 800 lb gorilla institutions out there that also are players in the life of economists working their way to status and influence.

Fannie Mae isn't the biggest of them, but it's been part of the mix. There's also the NSF, Rand, the White House, Congress, Wall Street, etc., etc.

We can study economists like we study bugs, and economics has a filter system, an incentive structure, and cohort world view synchronization (just like very other shoulder-rubbing narrow social community.)

Economists pretend none of this exists.

Well, good for them.

Well said:

"If he represents the "best and brightest" of the contemporary economics profession when the subject-matter is applied to policy issues, well we have a problem."

We would be justified in doubting the "scientific" status of the academic work of a professor of chemistry who would begin talking self evidence falsehoods and gibberish when applying his understanding of chemistry to what happens when you mix vinegar and baking powder.

So this sort of thing tends to implicate the "scientific" status of the academic work which lies behind this kind of understanding of the causal process of the real world.

Unless economic "science" in fact doesn't have anything at all to do with the real world, which may, in may instances, be the case

I'll cool it for now on this one. Will simply note that my "Point taken, Pete" remark indicated that I recognized that he was not personally attacking Stiglitz, unlike some others here.

I shall also grant that his consulting with/testifying for Fannie Mae was not something admirable.

I don't know whether Stiglitz or any other economist writing a paper for Fannie Mae was admirable or not admirable.

What important is not direct "corruption" or anything like that. I'm guessing that is rare.

What's important to think about is the subtle and sometimes indirect ways these institutions shape the intellectual landscape of economics and the individuals who swim within that sociological / institutional community.

Barkley, what is your take on the Stiglitz endorsement of Naomi Klein's book on global free trade?

It is interesting to note that in other countries, the revolving door between civil service and private practice is almost non-existent despite few laws preventing it.

I am told in Canada for example, a bank regulator would view moving to a bank as somewhat of a contravention of their professional ethics and career choice. I agree:)


Not so. Depends on the country. Tends to happen more in countries dominated by a "primate city," e.g. France and Japan. In Japan, the move by a successful bureaucrat into the private sector is known as "Amakadura," or "descent from heaven."

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