Friday, October 14, 2011
Mark Calabria accuses Joseph Stiglitz of being a knave.
Speaking before a group of protesters in Zuccotti Park, Nobel economics prize winner Joseph Stiglitz urged on the crowd, telling them they are “right to be indignant.” Professor Stiglitz goes on to explain, correctly in my view, that we have a financial system of socialized losses and privatized gains.
What the good professor fails to mention is only a few years ago, for what I understand was a nice paycheck, he was denying this very fact. In 2004, along with Jonathan and Peter Orszag, Professor Stiglitz wrote a paper for Fannie Mae in which he “estimated” that the “risk to the government from a potential default on GSE debt is effectively zero.” The paper goes on to argue “that the expected cost to the government of providing an explicit government guarantee on $1 trillion in GSE debt is just $2 million.” Now I understand his Nobel is in economics, not math, but $2 million sounds no where near the actual cost so far of $160 billion.
Perhaps Stiglitz was motivated by the money. But as I once before recounted, Stiglitz may be mistaken rather than corrupt. He once gave a paper at Yale when I was in Law School, attempting to show that government could improve economic welfare with a host of carefully calibrated taxes. I questioned him as to whether government could really do the job, given their ignorance and the problem of special interests. He said, "no problem -- these are not serious problems."
So perhaps Stiglitz just didn't realize that his zero estimate was ignorant. He knew less than he thought he did, just as his answer at Yale was less knowledgable than he thought it was.
Hat tip: Instapundit