Tuesday, October 16, 2007

Laissez-Faire "Never Based On Solid Empirical And Theoretical Foundations"

"Friedman and the other shock therapists were also guilty of oversimplification, basing their belief in the perfection of market economies on models that assumed perfect information, perfect competition, perfect risk markets. Indeed, the case against these policies is even stronger... They were never based on solid empirical and theoretical foundations, and even as many of these policies were being pushed, academic economists were explaining the limitations of markets — for instance, whenever information is imperfect, which is to say always." -- Joseph Stiglitz, "Bleakonomics", New York Times, 30 September 2007
I've quoted Saari and Samuelson each saying the same.

7 comments:

Gabriel M. said...

I'm sure that Stiglitz, if given free reign over our lives, would get us Pareto optimality and a poney each...

These policies stood the test of time, unlike others that brought everything from quasi-complete stagnation to unspeakable horrors.

They're at least as good as any other. And since freedom is a value in itself, it's a tie-breaker.

Anonymous said...

How much freedom is there in the typical capitalist workplace? It is organised as a dictatorship and so if freedom is a value in itself, then capitalism really has to be opposed.

And to point out the limitations and flaws in capitalism does not equate to seeking to rule over people. Equally, to assume that under capitalism no one has power is simply silly. Wealth is power.

Nor should we forget the unspeakable horrors which were inflicted onto society in order to create capitalism in the first place. Nor, of course, the horrors used to defend it from rebels -- fascism springs to mind, of course, but there are many others.

Iain
An Anarchist FAQ

YouNotSneaky! said...

"were also guilty of oversimplification"

Pot, meet kettle.

Robert Vienneau said...

I deny that Laissez Faire or shock therapy has stood the test of time.

Gabriel makes himself ridiculous by arguing against a proposition he pretends to find in the post. Yet the Samuelson quote included in the post by citation explicitly says something else. A nation's choices are not confined to either market fundamentalism or Stalinist central planning.

Gabriel M. said...

crzergwIain,
If that's "power" to you, let me just say that your priorities might not be in order. But then again, I don't really expect people in the West to understand.

Robert,
What has laissez faire to do with "shock therapy"? In any case, shock therapy is easier to defend. As someone who lives in a country that avoided serious reform for 15+ years, I can attest to the serious issues with that.

As for my alleged dualism, it's not mine. It's Stiglitz's. If there's someone who should know better, it's him. I'm nobody, he's a Nobel laureate.

Robert Vienneau said...

"Laissez faire", "neo-liberalism", and the "night watchman state" clearly have similar meanings. The "Washington consensus" and "shock therapy", I suppose, can be said to refer to processes intended to get a country to that dystopia. And "market fundamentalism", perhaps, is an attitude about both process and supposed end state.

But why should these distinctions be worth making at this level of abstraction? None have solid empirical or theoretical foundations.

And I do not find Stiglitz, in the news latterly, being dualistic.

baris said...

One point that is 'oversimplified' here: Stiglitz won his nobel prize in micro, but that does not make him an expert in macro. Does it?