Stiglitz's False Freedom
My review of Nobel winner Joe Stiglitz's "The Road to Freedom" in National Review
My review of Joe Stiglitz’s new book, “The Road to Freedom,” has been published by National Review.
Two slices.
First, on Stiglitz’s conception of the status quo:
in an extensive table that’s supposed to draw out how his prescriptions differ from the status quo, Stiglitz repeats that the “neoliberal” approach to most theoretical problems is overwhelmingly to “leave it to the market,” with disastrous consequences. “Progressive capitalist policies,” we are told, would instead include environmental regulation, industrial policies, and financial regulation to deal with externalities; investment in public goods; product disclosure, consumer and labor regulations, and class-action lawsuits to deal with imperfect information; social-insurance programs to deal with unexpected risk; macroeconomic stabilization through fiscal and monetary policies; antitrust laws; and minimum wages, redistribution, and government health-care programs to deal with inequality. If that all sounds familiar, it is because all these policies exist already in our supposedly neoliberal world, although Stiglitz would clearly like them to go much further.
And on the striking lack of quantification in the book:
For all the talk of the many market failures and externalities that exist, and all the wonderful benefits we’d supposedly see with more extensive progressive-capitalist policies to solve them, Stiglitz does not attempt to quantify anything.
There’s been a long history of economists running with mathematical proofs of the inadequacy of free markets to justify extensive government intervention. The 19th-century French economist Léon Walras, like Stiglitz, used such logic to argue that socialistic institutions were essential to achieving “free competition.”
But in declaring that perfect markets don’t exist, Stiglitz tilts at windmills. No real-world market is perfect. The logical leap is to assume that they are perfectible by governments, staffed by the same fallible humans who operate in the private sector. What we surely need in the messy real world is to weigh the costs and benefits of policies, on the margin, drawing on the experience of how government actually functions. Yet statistical claims appear, on average, just once every eight pages in this text — an extremely low figure for an economics book.
Much more in the full text here, including my analysis of Stiglitz’s assessment of the recent inflation.