"Politics Is at the Root of the Problem" by Joseph Stiglitz

[xchrom]

http://theeuropean-magazine.com/633-stiglitz-joseph/634-austerity-and-a-new-recession

?1334757938
Austerity policies are driving us towards a double-dip recession, warns US economist Joseph Stiglitz. He sat down with Martin Eiermann to discuss new economic thinking and the influence of money in politics.

The European: Four years after the beginning of the financial crisis, are you encouraged by the ways in which economists have tried to make sense of it, and by the ways in which those insights have been taken up by policy makers?
Stiglitz: Let me break this down in a slightly different way. Academic economists played a big role in causing the crisis. Their models were overly simplified, distorted, and left out the most important aspects. Those faulty models then encouraged policy-makers to believe that the markets would solve all the problems. Before the crisis, if I had been a narrow-minded economist, I would have been very pleased to see that academics had a big impact on policy. But unfortunately that was bad for the world. After the crisis, you would have hoped that the academic profession had changed and that policy-making had changed with it and would become more skeptical and cautious. You would have expected that after all the wrong predictions of the past, politics would have demanded from academics a rethinking of their theories. I am broadly disappointed on all accounts.

The European: Economists have seen the flaws of their models but have not worked to discard or improve them?
Stiglitz: Within academia, those who believed in free markets before the crisis still do so today. A few people have shifted, and I want to give credit to them for saying: “We were wrong. We underestimated this or that aspect of our models.” But for the most part, the response was different. Believers in the free market have not revised their beliefs.

The European: So let’s take a longer view. Do you think that the crisis will have an effect on future generations of economists and policy-makers, for example by changing the way that economic basics are taught?
Stiglitz: I think that change is really occurring with the young people. My young students overwhelmingly don’t understand how people could have believed in the old models. That is good. But on the other hand, many of them say that if you want to be an economist, you still have to deal with all the old guys who believe in their wrong theories, who teach those theories, and expect you to believe in them as well. So they choose not to go into those branches of economics. But where I have been even more disappointed is American policy-making. Ben Bernanke gives a speech and says something like, there was nothing wrong with economic theory, the problems were a few details in implementation. In fact, there was a lot wrong with economic theory and with the basic policy framework that was derived from theory. If your mindset is that nothing was wrong, you will not demand new models. That’s a big disappointment.

[marmar]

1. A wise man who people in power clearly don't spend enough time listening to.

Last edited Thu Apr 26, 2012, 05:28 PM - Edit history (1)

nt

[xchrom]

2. indeed. nt

[Egalitarian Thug]

7. The people that matter actively avoid listening to him, his facts are quite inconvenient for them.nt

[Jefferson23]

3. BIG disappointment he was not an advisor to Obama. n/t

[kristopher]

4. "Has the political Left been able to articulate that criticism? "

Has the political Left been able to articulate that criticism?

Stiglitz: Paul Krugman has been very strong on articulating criticism of the austerity arguments. The broader attack has been made, but I am not sure whether it has been fully heard. The critical question right now is how we grade economic systems. It hasn’t been fully articulated yet but I think we will win this one. Even the Right is beginning to agree that GDP is not a good measure of economic progress. The notion of the welfare of most citizens is almost a no-brainer.

There were a number of people he could have gone to that would have been more friendly to public welfare. I'd love to sit down with Obama and have a 20 minute talk about what he believes regarding the role of economics in public policy.

[xchrom]

5. I think you would have been disappointed at the Depth of

Reply.

Really - in part - it has to do with Harvard.

Neo-liberal thinking, reasoning is part & parcel of that education system - I.e. Arne Duncan.

[Egalitarian Thug]

6. And to think this man actually wanted to help President Obama with the mess

he inherited. He was of course, immediately rejected by the Wall Street Boys that were appointed to oversee the getaway.
K&R

[kenny blankenship]

8. Like politicians, economists know who butters their bread

and they know what kind of analysis they want to hear out of economists. Hence economic orthodoxy isn't about to change, falsified models and facts notwithstanding.