Sunday, December 14, 2008

Stiglitz the Keynesian

Stigliz has an article, "Capitalist Fools", in the January issue of Vanity Fair. He argues that the new depression is the result of:
  • Firing Volker after he successfully fought inflation
  • Abolishing Glass-Steagall
  • Imposing the non-stimulative and regressive Bush tax cuts
  • Incentive structure encouraging faulty accounting
  • Paulson's faulty October bail out package
In summary, "The truth is most of the individual mistakes boil down to just one: a belief that markets are self-adjusting and that the role of government should be minimal." Stiglitz is consistent. But I thought males read Vanity Fair, like Esquire, for fashion tips.

And he has an 11 December article in Business Day, a South African newspaper. Stiglitz is interested in how to formulate Keynesian policy effectively.

In local news... Last March, Stiglitz wrote the New York State governor recommending that NY address its deficit by raising taxes on the rich.

Here's a characterization of Stiglitz's economic teaching:
"In his lectures, Stiglitz applied the machinery of neoclassical economics to upturn the standard results. Like a magician drawing rabbits from a hat, he could make demand curves slope up, supply curves slope down, markets in competitive equilibrium fail to clear, cross-subsidies make everyone better off, students over-educate themselves, and farmers produce the wrong quantities of goods. And then he would show how the magic reflected some very human and rational response to imperfect information. The theorem that individual rationality leads to social rationality applies to a special case, not the general case." -- Karla Hoff, in Economics for an Imperfect World: Essays in Honor of Joseph E. Stiglitz (ed. by R. Arnott, B. Greenwald, R. Kanbur, & B. Nalebuff) MIT Press, 2003 (quoted by John Lodewijks, "Review", Review of Political Economy, V. 21, N. 1, 2009)
So why is Stiglitz considered a mainstream economist and Ian Steedman a non-mainstream heterodox economist?


YouNotSneaky! said...

What happened to Volcker = Shock Therapy = Bad! ?

Anonymous said...

"What happened to Volcker = Shock Therapy = Bad! ?"

Still true. I'm not aware of Stiglitz having a post-Keynesian perspective on inflation and what happened in the 1980s.... But perhaps I'm wrong, as I cannot say I've read everything by him.

And I must say, Obama picking Volcker is not a good sign at all. But perfectly consistent with the Democrats as a bosses party, of course.

An Anarchist FAQ

Robert Vienneau said...

I, too, don't know that Stiglitz's comments on Volker are inconsistent with any of his prior statements.