Feb 11, 11
Read in February, 2011
Quite comprehensive. Stiglitz must write like the freakin dickens, or he has a verbose editor, or something of that sort. I was amazed by how much Stiglitz had to say in this book, perhaps a testament to his passion of the subject and his desire to see the U.S. handle the recession better than it has so far. I think he gets a mite carried away with some accusations but think it defensible on the basis that his side of the debate is the one 1) not getting heard enough and 2) more worth hearing.
Considering how comprehensive the book is, Stiglitz did make the issues notably accessible, helpful to a novice in economics (oh, Econ 201, you seem so long ago... you were so long ago!). I found the latter chapters of the book to be somewhat more agreeable than the beginning; Stiglitz's accusatory tone grated at me more at the outset but faded somewhat as I realized that Stiglitz's actual economic/public policy desires are far more reasonable than some of his left-leaning rants led me to initially believe.
His arguments and recommendations throughout the book are based on two primary arguments (imo): 1) that - consistent with his cornerstone research and contributions to information asymmetry - the models used by banks, bankers, rating agencies, brokers, insurers, lenders, securitizers (pretty sure that's not a word), and individuals were too simplistic and did not properly take into account the fact that "markets and information are imperfect," and 2) that laissez-faire markets act like selfish little brats when left to their own design.
He's obviously very Rah Keynes! and Boo Friedman*! but, again, by the end of the book you realize that he understands the importance of both "free" markets and government. He doesn't think that excessive government regulation is ideal but sees it as a necessary evil (i.e., if you don't have game rules, you're going to have a pretty insane game). In fact, he spends a good deal of time lambasting the Fed and Treasury and the cronies in Washington. Stiglitz said in an interview, "The real debate today is about finding the right balance between the market and government. Both are needed. They can each complement each other. This balance will differ from time to time and place to place."
Stiglitz also voices his concern that we (the people) may have lost faith in capitalism due to the recession, and that communist and dictatorial governments elsewhere in the world may use our failures against us. He argues that America has done a piss-poor job of being an emissary of good economic policy - we screwed over Southeast Asia during the Asian financial crisis in 1997, and developed countries continue to screw over developing countries, which will likely end up backfiring on us, especially from China and India.
All in all, a good read, if you have time for it. If not, go watch "Inside Job."
*It's interesting that, per Wikipedia's article on Friedman, in the section responding to Keynesian criticism, the Chicago school does not really defend Friedman's theories but just attempts to defend itself: “The Chicago School never said we wanted blind deregulation ... We should really ask who were the people in 2000 who decided markets don’t need regulating. Those were not Chicago economists. Some of them were Clinton officials, and some of them are now advising Obama.”