I appreciate your comments, GT. Your analogies were rather disjointed, you were quite uneconomical with your words, and using language freely is quite different than referring to someone as a dumbass. Keep writing GT, you look more foolish and idiotic by the word. I know many people not trained in car mechanics who can repair a car, and make it run perfectly. And yet, we have legions of reasonably well trained economists who produce what? And make what work well? A science? Please. You seem to be educated just enough to be dangerous to yourself and those who may be gullible enough to believe your linguistic fairy tales. I still say farming might be a good option for you. If you enjoy eating, that is.
"Constrained means of acquiring happiness." Wonderful fucking quote.
And war "never being undertaken by private decision making" Get out of the classroom, GT and into the real fucking world.
When an engineer screws up, a building falls down, and it's there for all to see. When economies crumble, the economists have a millions excuses for their science and those around them who didn't follow their advice. Sorry GT, I'd like to go on, but I actually don't have the time. I have to produce something to make me happy. Rather elementary it seems to me. But, I'm no smart economist.

The "new economic model" must incorporate a way to value the future.

Maybe the Native concept of "impact on the seventh generation hence" would be a good place to start.

A little bit surprised that Mr. Stiglitz didn't mention lowering consumption (fuel efficient cars, eat less meat) as a major step to reducing the global fuel and food crisis. These are steps that can be implemented immediately or very quickly and would buy us a lot of time to begin weaning ourselves off of fossil fuels.
Taxing the wealthy more and the middle class less is a logical step, however both the Democrats and Republicans are determined not to do that.
In the last election John Kerry tried to out do George Bush by offering bigger tax cuts to corporations than Bushie promised. Both Hillary and Obama seem to tread lightly on the topic of corporate tax increases while neither one discusses large cuts to an over bloated military and 'domestic security' force.
Habits won't change without strong legislation. Right now no candidate (except Ralph Nader) seems to have the backbone to suggest an end to corporate coddling.

With no disrespect, this is nothing more than yet another laundry list of what "we need to do" without a single suggestion as to how we might actually go about doing it, en masse, in the face of the multiple Goliaths standing in our way, beginning with our own mighty US Military-Corporate-Media-Industrial-Congressional Complex.

Said MCMICC invades countries, kills and maims millions without compunction, steals everything it can, and lies about all of it.

What's our plan?

Good question frank

As you must acknowledge, any collective action that threatens the establishment's ever greater accumulation of wealth and power will most likely attract various negative responses.

The trouble with the establisment elite is that any microbe of a possible threat to their wealth and power usually elicits a massive and violent reaction.

Look at the long-term and substained reactions to the mild humanitarian liberalism of the '60s.

Most of the 60s movement activists were only trying to make the US establishment live up to the slogans we learned from our childhood TV heros: Roy Rogers, Superman and/or the Lone Ranger.

We wanted truth and justice to really BE the American way. We wanted a "return" to fair play and decency.

If you view today's children's entertainment venues, there is not one superhero that fights for truth, justice or anything else except Old Testament revenge.

Truth and justice...What's that?

Last, the elite doesn't have the superego of so-called International Communism to keep the them in line.

When that general criticism of capitalism existed (along with the muscle behind it) the elite had to constantly prove that our abundent consumer society and political democracy was better than the commie's.

At present, nothing external to the elite is keeping the lid on the id. Rampant capitalism is spiraling out of control. As with an individual, an unleashed id always produces extreme personality disorders, especially those leading to sociopathology.

And if you wish to borrow a biological metaphor, capitalism is like a cancer cell.
When its growing, it destroys the healthy surrounding cells.

frank, good analysis. The "plan" is this..what I and others have done most of our lives. I mentioned this in another comment here today - and got no response ( I wonder why?)

The plan is....Don't work for the bastards! Don't give them one red cent of your resources. Buy absolutely nothing from Corporate venues. Live and work for yourself and your neighbors. Never enlist in the MIC, nor - as previously stated - work in ANY industry that supports it.

This is Revolution - and peaceable, at that. Time to get some gumption, folks. This is the plan - basically, non-violent non-cooperation. This has been shown to work marvelously - Ghandi, anyone?

While I respect and agree with Joseph Stiglitz on most points, I differ with his solution on this one.
I believe that the solution is more simple than discussed. Nationalize the energy industry. Why should corporations profit while our citizens suffer? What percentage of our military expenditure goes directly as profit to the oil companies? They should have no say in our national policy. Quite the reverse. The oil companies have no right to hold the well being of this country over a barrel. Why should a company have more rights than a person trying to get by? I've known many great people. I know not one whom is worth more than one or two million a year for their labor. Fire the oil company executives. Stop the bleeding of our national treasure and treasury. Take back the oil companies.

worried 1

You are correct; in most nations, the oil industry is nationalized...and the state has collected great wealth.

In some nations, like Venezuela, the leading political party is attempting to redistribute oil wealth to the lower-classes.

The state could offer good-paying jobs and/or training and education to the jobless. It could direct funds toward the non-commercial visual, musical and dramatic arts; non-commercial media could be sponsered while, at the same time, commercial monopolized media could be either broken up and/or subject to strict regulations.

Look, these media giants are given our public airwaves free of charge. What do they actually give us in return when it comes to high-quality information or high-quality cultural products?

Possibly, Russia may follow Venezuela's lead; however, the leading party is presently spending a great deal of oil wealth in order to regain Russia's ealier Soviet-era superpower status.

Of course, oil wealth is socially distributed in Norway.

The point is is that nationalization will rake in more money than taxation which is minimal in the present day USA.

It certainly would massively lower our deficit, raise the value of the dollar, and, possibly, reign in the speculator-engendered inflation in energy and food prices.

In addition, the vast national earnings garnered from state-owned oil companies could be used for reinvestments in both our infrastructure (and the development of mass-transit industries) and the social well-being of our less fortunate citizens.

"Rich countries must reduce, if not eliminate, distortional agriculture and energy policies, and help those in the poorest countries improve their capacity to produce food."

That suggestion only leads to more business as usual - what we don't need. How about something like this: "Rich countries must reduce, if not eliminate, distortional agriculture and energy policies, and leave those in the poorest countries ALONE so they may achieve self suficiency."

worried1___I disagree with the idea of nationalizing energy companies and letting the government control everything. It is fine for government to set regulations for them and other industries, but there is nothing wrong with the profit motive.

Remember there are thousands of individuals who own stock in all the energy companies who are profiting thereby and are able to put a portion of their earnings back into circulation. Efforts are being made by stockholders to limit the outrageous salaries and retirement benefits of management.

The sensible method is as Stiglitz suggested, and that is to put the tax system back where it was when the Bush cabal gave everything away to big companies, especially energy producers, and also to the super rich, which is wrecking our country.

For God's sake, folks - how on EARTH is GOVERNMENT the SOLUTION?

The primary cause of our present malaise is persistent misallocation of resources (correctly identified by Stiglitz as generating a massive increase in financial-sector activity)..

And WHY were those resources misallocated?

Think about the monetary transmission mechanism and it will be no surprise at all that financial markets benefit when monetary bureaucrats hold the rate of interest artificially low. The first port of call of newly-created money is.... BANKS, dumbass. And from there, it is utilised with.... 32-to-1 LEVERAGE, dumbass.

So colour me not-really-fucking-shocked that bank revenue and profits rise relative to GDP when the government tries to fix the price of short term money.

And when a government (or two) starts blowing up bits of the planet that have a load of oil under them, the persistent rise in the price of crude becomes a policy problem for the Department of The Fucking Obvious.

Government is NOT the solution, it is the PROBLEM. Don't think about the failure of tax cuts to provde stimulus; think instead of the gargantuan waste of tax receipts on million-buck-a-pop missiles raining down on the heads of other people's children.

And balakirev - I mildly agree that the Western elite had a vested interest in allowing dribs to spill frm the table when the USSR was still around. However the overarching problem was still (and IS still) the entire State apparatus and its ability to be suborned by corporations (due to the PARTY system which is custom designed to maximinse bang for the rent-seeking buck).

It is something not many folks think about - those who think that the Iraq was was a failure need to reframe their thinking. It has been a MASSIVE success and has gone pretty much EXACTLY as planned. When it is not a simple pissing contest between politicians, War is often about a major corporate interest trying to find a way to acquire some resources with the acquisition cost paid for by the taxbase. Often it is both. Gving the beast a more efficient way of collecting revenue just ensures that the destruction is more massive and more widespread.

As a reasonably well trained economist, I used to accept the existence of goods that have external benefits (and thus which have a built in rationale for redistribution funded by taxes - which ideally ought to be rogressive due to the diminishing marginal utility of money). Basic education, basic health care, some minimal transfer payment (welfare) system, national defence... that sort of thing. Things where publicness aspects in consumption or producton meant that provate markets resulted in a suboptimal level of output.

Then I had it pointed out to me that when you decide to have a State in order to do all that rosy stuff, you bring into existence a beast with its own agenda - and that agenda leads inexorably, always and everywhere, to WAR.

One middle-sized war will negate all the additional consumer surplus acquired by ensuring that the market for basic education, health and welfare is closer-to-optimal.

Cheerio

GT
France

GT
"a reasonably well trained economist" usually does have a problem viewing the profit motive as anything other than God's law. And, as a basic tenet of social Darwinism. Sometime in the near future, people will also be taught in our edifices of higher learning that cooperation and sharing are not the dirty words modern economists believe. This is being discovered in the biological sciences, and I believe that this new idea may soon spread to the study of economics. Be ready. So long as economists believe that the only valid motivating factor to human effort must be profit, our languages no longer allow us further meaningful dialog. I have little patience for the Chicago style economics vs. socialism/communism argument. The world HAS become socialist, only profiting narrow corporate interests this time around. These are the political realities, here and in France and around the world. This has destroyed the dream of democracy. The disparity between the rich and the poor needs immediate attention. I think it's too late, but there's a change coming. People are catching on. But those leading this change, by definition, will not be well trained economics people from your world. Count on this, prepare for a career change, GT. Farming may be a good choice for the future few decades. It will be different for most economists to have to work with their hands and produce real things and work within the laws of nature. But, I'm sure you'll do just fine.

Also, my idea of government encompasses the idea that it is us, executing the will of the people. Do you not believe that this is what government is supposed to be, and what well trained people are supposedly working for? The distinction many economists make between government and private enterprise has always eluded me. We are inefficient, slothful morons when we get a government paycheck, yet, suddenly more efficient, competitive and moral in the private realm economic model you speak for. I don't buy it, and experience and history does not bear it out. Is Haliburton saving US taxpayers money by their supreme efficiency over what our own government (we the people) can do? At least before, when people stole, it seemed people were embarrassed. Dick Cheney is a hero for looting our purses. Go Privatization. Exxon Mobil profits higher than many countries GDP. Go Privatization. Corporations and banks making money in a dictatorial manner from the unwitting citizens. Go corporatization. Turning the earths priceless resources into cheap Wal-Mart commodities. Go Privatization. Foreign companies owning, then charging poor people for their own water. Cheers for Privatization.

GT, I agree that the whole world should quit wasting money on defense. In using that money, some of us non-economists could, rather rapidly, create a world that would cease fighting, and become a truly productive, sustainable and fair world. If you don't believe this, then, again, we speak a different language. If someone doesn't believe that our world is on the precipice of nuclear and biological destruction, and that we are radically and rapidly destroying the life sustaining capabilities of this earth, than I really can't waste my time starting at the beginning. Macro and Micro economics will soon be meaningless. Absolutely meaningless. Do you not see this, GT?

When you entirely rule out the humanist element in economic discussions, you are forced into the conclusions and economic myths that the world does such a great job of putting out via "reasonably well trained economists". To paraphase a statement by Noam Chomsky; 'a testament to the power and efficacy of a higher education'

When you make statements like..."and that agenda leads inexorably, always and everywhere, to WAR." With thinking like that, human progress hasn't a chance.
When you state that "Government is NOT the solution, it is the PROBLEM", it reminds me of how far our world of academia has to go.

I also like it when posters use the word "dumbass" and "fucking obvious" for it truly gives their informed opinion much more weight.
Keep up the good writing, GT.

Fruit Loop

NT
Mangrove Cay

Lay down the yoke for a while and strengthen your personal sustainability. Americans are not yet sufficiently awakened to act. Wait until the are and then pick up the yoke again.

So WHAT'S the problem???
WAL-MART is hiring! What, blue is NOT your color???

Mr. Joseph Stiglitz

With all due respect for your work on global poverty, I would like you try and convince me on camera that Globalization will work because I believe, I like so many that it will not and does not! Smaller is better, the mortgage crisis is a benefit of globalization brought to you by Wall Street and their globalized way to economically steal from the world. I would like if you could join Noam Chomsky and myself in an interview scheduled for July. I will contact you through Columbia to advise you of my contact.

Thank You,

IKE

We must learn to get by on less- actually, much much less. The sooner people start to realize this and react accordingly the less time they will spend complaining and looking for a scapegoat. While hedge-funds are a significant part of the problem, the reality is that prices for transportation, food, and pretty much everything are going to continue to increase and to grasp this now rather than later will save people a lot of needless pain in the long-run. I realize that most of the visitors of this site are the last ones that need to be told this, but it wasn't until recently that it all really sunk in for me after a friend of mine gave me a "doomsday" lecture and introduced me to a movie titled "Crude Awakening". Pretty scary stuff. But it all really makes sense. He's currently raising chickens and starting up a garden in his backyard, hangs his clothes out to dry etc. etc. Now when I see people driving their cars aimlessly about town I just shake my head with the realization that they don't even see it coming. The silver lining to all of this, if you want to call it that, is that we are at the dawn of a new era and the human species will not have the energy necessary to continue to obliterate our planet at such a rapid pace. There will be a huge die-off as well, but let's not talk about that.

Hi there Worried1

You seem to tar economics with a brush that it doesn't deserve.

It's clear that you think that economists are some form of accountancy-type, reducing human interactions to dollar and cents. That is a sign of ignorance of the amazing richness of the discipline, which - at its absolute CORE - is actually about HAPPINESS. 'Felicity', if you like.

You see, people everywhere have two very fundamental attributes: they want to be happy, and they have constrained means of acquiring happiness.

When this quest - the pursuit of happiness in a constrained world - is taught to undergraduates, it is generally packaged in a way that kiddies can absorb in order to provide a 20-minute exam answer.

So this beautiful idea - getting as happy as possible given your tastes and limited resources - is taught as being a static optimisation problem: maximise Utility subject to a vector of prices and a budget constraint.

Or - for corporations - maximise profit given a vector of prices and a production function.

These small-scale mathematical representations of the basic economic problems are meant as pedagogical aids, to ILLUSTRATE the theory. Nobody in their right mind thinks that they depict the actual decision making mechanism (undergrads are not equipped to deal with uncertainty, for example, or intertemporal decision making... and nobody really thinks that the utlity function is Cobb-Douglas or CES, or that it only includes physical goods).

Too often these basic pedagogical aids become viewed (by those who leave the discpline after three years of undergraduate work) as the be-all and end-all, since they are easy to recall and make one look clever when confronted by a non-numerate person. And if you can chuck words like 'constrained optimisation' into a conversation about economics, it is a bit like playing an ace in a game of euchre... when the other person doesn't know how to play (and so don't realise even if they hold both Bowers).

The math is NOT the whole of the discipline, any more than statistical analysis of the efficacy of a new heart drug is the whole of cardiology.

As to the other points you make, I am not clear how you draw the conclusion that we disagree on much; it ought to have been clear that I am anti-war (primarily for reasons of morality, but also because it is massively inefficient and WASTEFUL of both lives and resources... and would NEVER be undertaken by private decision making).

However to think that money not spent on defence should then be spent - BY GOVERNMENT - on further distorting the economy in some bid to generate a 'fair' societal nirvana, is just silly. You will never get outcomes remotely like those you desire while you have democracy, because politicians will ALWAYS be able to convince the economically ignorant that the government can give people things 'for free'. (In fact the government will either tax EVERYONE in order to provide the desired services to SOME... and always with the risk of war in the background).

Being employed by government does not immediately make one unproductive - nobody ever said that. What it actually represents is the performance of a task that may not exist under a private market, or might exist to a much more reduced extent.

Examples: those who work for the IRS extort money from workers under threat of violence (they run a potection racket). That would still exist under a private market, but only in a very localised way (think "The Sopranos" - fewer clerks, a LOT fewer middle-managers, and a 'protection racket' tax rate of 5%-10%).

Without the coercive band of thgs that is the State, nobody would work on a battleship, though - because the private market would never endogenously generate such a wasteful pile of death.

I don't now what you do for a living - let's assume you're an engineer. If I - as a non-engineer - presumed to tell you what your profession was all about, people would think me an ass. (More so if I got it wrong).

However everybody is allowed to hold whatever ill-informed opinion about
(a) what economics IS; and
(b) how best to construct the system of resource allocation in order to maximise whatever it is that they think ought to be maximised.

People feel like they ought to know how to 'do' economics because most of their life is spent making economic decisions - from deciding whether to buy a loaf or a bagel (which of the two will make me happier, given their prices and my preferences?), to buying a house.

The idea that making economic decisions entitles one to comment meaningfully on the discipline of economics, is a bit like thinking "I have a car - which means that I am daily exposed to automobile principles. I am therefore endowed with the ability to tell an auto mechanic whether or not his diagnosis is correct - without having ever taken more than a layman's interest in how cars work".

I have spent twenty years of my life thinking about stuff like this - both as a researcher and as a private citizen. As I say, I consider myself reasonably well-educated, particularly as regards the depredations of the political class on the societies they infest, and also on the likely ramifications of changing the existing system (and the optimal replacement). I did not get into this sphere as a result of reading newspapers (I do not want to get into an arguent against auto-didacticism, but bear in mind that it is hard to do well as an autodidact if your teacher is a nincompoop).

It doesn't matter (much) to me whether you believe or not that the best way to make the largest number of people the happiest that they can be, is to give them complete control over their own resources. That's just the way it is, in both theory and practice. (Similarly, vehicle exhaust fumes won't smell nicer if you put lavender in the tank).

That does NOT mean that everybody would be able to be happy under a private market. Nobody thinks that universal bliss is possible. It also does NOT mean that everybody's expectations will be fulfilled.

It simply means that resources will flow towards those who put them to the most productive use, which will generate growth in the amount of happiness available from the consumption of material goods... which in turn will reduce the cost of pursuit of NON-material happiness.

So people will be as happy as they can possiby be, under an unconstrained market (for those familiar with maths, an objective functional always reaches a higher maximum when a constraint is relaxed). For those who still find themselves miserable, there will be people who will offer them a hand VOLUNTARILY (little things like asking a neighour if I can get them anything from the bakery, donating garments to second hand shops, private charity... private markets do not result in 'the law of the jungle').

People opposed to this 'free market' doctrine, tend to be so as a result of seeing the outcomes generated by the US model. But the US model is not, and has NEVER been, free markets; the US has been a crony-ocracy since its foundation... and so it is no surprise when the only people who do well (with some miniscule number of exceptions) are the cronies. The US has used military conquest as a means to acquire resources (again, since its foundation - ask any Indian) - which invariably entailed the public FUNDING of a war which then resulted in the private ownsership (by a government crony) of the resources captured.

And as for bad language - I have always HATED this ludicrous notion that academic discourse much be dispassionate.

What is it about some folks that they think discourse has to take place as if we live in a Norman Rockwell painting? The words I used reflect my outrage and disgust, and have been in our marvellous language FAR longer than their more polite equivalents. I would let every child use the full wealth of our linguistic heritage (you quote Chomksy - read something about linguistics), including those forceful expletives that our Saxon forebears gave us.

I would rather live in a world where a 4 year old said "Fuck off", than a world in which Dick Cheney ordered the violent death of tens of thousands and then defended it, and got a response in polite language.

Cheerio

GT
France

GT

Very good post! Yes, you are right the application of economics as practiced in the USA is with mind to global hegemony using the combination of armed threat or economic sanctions. With the rise of the Asia pacific Rim, the EU, and the Russian economies the economic power that America had Post World War II is over. However, what it has lost as a result of its foreign adventures is made up once again with the leverage of pure power.

There is no relief in sight from a country that has practiced its economic will on the world and has installed a global economy in Wall Street's image.