Sunday, November 11, 2007
Tyler Cowan critiques a recent essay by Joesph Stiglitz for apparent political bias. When I used to follow this stuff, I thought Stiglitz was a very politically biased economist, who I supposed deserved the Nobel Prize, but who, in my experience, let his politics run his economic reasoning.
While Stiglitz has made some important contributions, I believe he has ignored the limitations on their use. While I was in law school, I heard Stiglitz give a paper on how some tax, applied in exactly the right way, could correct some market imperfection. Afterward, I asked him whether he had confidence that the government would apply that tax correctly. Didn't public choice theory suggest the tax was unlikely to be applied right? Stiglitz was unmoved. He couldn't see why the government wouldn't do its job correctly.