Joe Stiglitz and His Discontents

Friday evening we went to see Nobel prize winner, former Clinton adminstration and World Bank honcho and best selling author Jospeh Stiglitz 'chat' with NZ-domiciled economic journalist Rod Oram as part of Readers and Writers week at the Wellington International Festival.

In the course of the hour or so of discussion we got for the $25 entry fee, Stiglitz:

--reiterated that 'there needs to be a balance' between the responsibilities of markets and government. He cited his own work on information asymmetries as demonstrating why markets aren't always efficient, and pulled out what was no doubt a favoured quote that 'the reason why the invisible hand is invisible is that in many cases it isn't actually there' .

-- heaped special praise on the the Scandinavian countries as having effectively struck that balance and having succeeded through 'investing in their young people' and being prepared to pragmatically review and revise policies.

-- stressed that governments need to implement redistributive policies to compensate those who lose out under international trade and globalisation. He (to my moderate surprise) slightly favoured Obama to achieve this in the US, but said that 'the policy differences between the two [Democratic candidates] are much less than those with McCain'.

-- argued that central banks should not be restricted to narrow inflation-only targets, but should also have economic growth and employment as objectives. He suggested that former Federal Reserver chairman Alan Greenspan bore some of the blame for the current credit crisis, by encouraging people to take out variable-rate mortagages.

-- in response to the inevitable 'but is economic growth sustainable' audience question, agreed that better measures of economic wellbeing and progress than simple GDP need to be developed, factoring in environmental degradation, resource depletion and so forth (check out the work of Partha Dasgupta for what these might look like).

When asked about whether he preferred a cap-and-trade system or carbon tax, he said that the two were near enough to equivalent if emission credits are auctioned. Giving away the emissions allowances -- as is set to happen in New Zealand -- he thought would 'give scope for corruption'. Ideally, said Stigliz, there should be a fully international auction of emissons permits.

Stiglitz came across as the atchetype sensible progressive, spontaneuously applauded on occasions by the 1,500 or so right-on middle class Wellingtonians. With his friendly-bear demeanour and softly gruff tones, he reminded me of another maverick New England academic, philosopher Daniel Dennett. As was the case when I watched Dennett tear apart creationists in front of a group of atheist or agnostic philosophy students, I thought it might be more fun to see Stiglitz put his well-reasoned messages to a crowded town hall in rural Texas, or maybe Te Kuiti.