Joseph Stiglitz's Academic Solutions | Big Think

Joseph Stiglitz's Academic Solutions

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Joseph Stiglitz’s Academic Solutions

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Joseph E. Stiglitz:

A graduate of Amherst College, Joseph E. Stiglitz received his PHD from MIT in 1967, became a full professor at Yale in 1970, and in 1979 was awarded the John Bates Clark Award, given biennially by the American Economic Association to the economist under 40 who has made the most significant contribution to the field. He has taught at Princeton, Stanford, MIT and was the Drummond Professor and a fellow of All Souls College, Oxford. He is now University Professor at Columbia University in New York and Chair of Columbia University's Committee on Global Thought. He is also the co-founder and Executive Director of the Initiative for Policy Dialogue at Columbia. Stiglitz helped create a new branch of economics, "The Economics of Information," exploring the consequences of information asymmetries and pioneering such pivotal concepts as adverse selection and moral hazard, which have now become standard tools not only of theorists, but of policy analysts. In 2001, he was awarded the Nobel Prize in economics for his analyses of markets with asymmetric information, and he was a lead author of the 1995 Report of the Intergovernmental Panel on Climate Change, which shared the 2007 Nobel Peace Prize. His most recent book, The Three Trillion Dollar War: The True Cost of the Iraq Conflict measures the war's opportunity cost to Americans.

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TRANSCRIPT:

Card: Do you recommend any theoretical solutions to the crisis?

Stiglitz: Well, the question… the pivotal question right now is what should be done? What we did, you know, the… they turn to the financial markets to get advice. The government turned to financial markets to get advice and what to do with the problems with Fannie Mae and Freddie Mac, didn’t work. You know, they have a proven track record, not only of getting us into the mess, but of not knowing how to get us out okay? So, the question is, who do we turn to, to understand the systemic properties, how the whole things fit together and in a way, that was the critical failure of [IB]. They didn’t see how the whole picture fit together. They didn’t see how it was impossible for house prices to go up and incomes to go down, it didn’t add up, but they didn’t… they didn’t look at that broader picture and so, you have to turn to people who have been studying the economic system as a whole, understanding what happens when households borrow, the government borrows, the nation as a whole borrows, as much as we’ve been doing, what are the consequences for the functioning of the entire system. It’s complex. I mean, it’s very easy for a business to understand how to make money for itself, I mean, that’s difficult enough, but to try to understand the interrelations between all of the parts. That’s what economists are supposed to do [IB] better than others and we all don’t see eye to eye, I mean, that clear. But we need to have a national debate and recognize that we made some very big mistakes along this road.