"The First Fundamental Theorem of Welfare Economics [asserts] that every competitive equilibrium is efficient. Based on the work in information economics for which he won the Nobel Prize, Stiglitz finds that this most basic claim is not robust to the removal of the assumption that information is perfect... 'Quite contrary to that theorem', Stiglitz concluded, 'competitive economies are almost never efficient.'"
They also quote Stiglitz as saying that "[Economics as taught] in America's graduate schools... bears testimony to a triumph of idology over science." According to the authors:
"Economics courses at the undergraduate level typically place little-to-no emphasis on learning the tools of economic science, instead focusing on teaching algebraic simplifications of actual economic work, and then assigning problem sets in which students plug in values for the different variables. It is good practice, perhaps, for a few specific mathematical techniques, namely constrained maximization, but it is hardly a training in how to think creatively about dealing with the economy. The bedrock of economics as it is taught is not the subject matter - the economy - or even the approach - the neoclassical school of thought - but ideology, as Stiglitz said. The repetition of simplified and vulgarized economic conclusions is the main task of introductory, intermediate, and even some advanced economics courses, and little else sticks with the students."
I haven't read much of Stiglitz on information asymmetries. I do have this article handy:
- David M. G. Newbery and Joseph E. Stigliz (1982). "The Choice of Techniques and the Optimality of Market Equilibrium with Rational Expectations", Journal of Political Economy, V. 90, N. 2 (Apr.): 223-246