Friday, August 13, 2010

Joe Stiglitz on Message, Again

Michael Stutchbury, Economics editor, The Australian reports:

‘Labor's money injections win dubious approval’

‘Stiglitz claims such market failure is pervasive and endemic. The famous invisible hand of 18th-century Scottish economist Adam Smith is often invisible because it's not actually there. "Markets do not in general lead to efficient outcomes," Stiglitz claimed in giving the Douglas Copland lecture in honour of the first president of Australia's Economics Society.’

Stiglitz has said this before (as reported on Lost Legacy) and it is to be hoped will set a trend among modern economists.

He combines a denial of the assertions (emanating from Paul Samuelson, among others, from the 1940s) that Adam Smith’s use of the invisible hand as a metaphor was about ‘market efficiency’ and that all the self-interested actions of people in markets unintentionally produced beneficial outcomes for the public good, with an acknowledgment that this was not true either in fact or in theory.

It remains to be seen just how widespread these iconoclastic counter-assertions permeate into the main body of modern economists, but it is a start.

Lost Legacy welcomes what Stiglitz is saying in 2010.



Blogger r l love said...


Perhaps I am missing something, but you seem to be stretching what Stiglitz said to suit your opinions on Smith's use of the invisible hand metaphor. Where is the "denial of the assertions"?

Stiglitz also uses the phrase "it is not actually there" in the preface of his book 'Making Globalization Work', but, he says nothing there that relates to whether Smith intended the invisible hand to be a function of market efficiency. I have read a fair amount of Stiglitz and my interpretation of his position regarding the invisible hand is that it 'is' a force that has influence on the scales... but, a force that has always been manipulated, mainly due to information 'asymmetries'. This is of course at the apex of the work that made him a Nobel laureate. What I have always thought that Stiglitz meant to imply, by the oft used statment: "the invisible hand is often invisible because it's not actually there", is that the hand is being obstructed by stronger forces?

Ray L Love

2:52 pm  

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