Sorry, Stiglitz: It’s Socialism That’s Rigged — not Capitalism

Sorry, Stiglitz: It’s Socialism That’s Rigged — not Capitalism

by William L. Anderson

Ever since winning the Nobel Memorial Prize in “Economic Science” in 2001, Joseph Stiglitz has been a one-man advocacy band for growth of the state. After 9/11, for example, he called for the formation of a federal agency to provide security for airline passengers, which he claimed would send a “signal” for quality. (Stiglitz won his prize for “proving” that free markets are “inefficient” and always result in less-than-optimal outcomes because of asymmetric information. Only government in the hands of Really Smart People like Stiglitz can direct production and exchange consistently to efficient and “just” results.)

More than a decade ago, Stiglitz lavished praise for the socialist government of the late Hugo Chavez in Venezuela, declaring:

Venezuelan President Hugo Chavez appears to have had success in bringing health and education to the people in the poor neighborhoods of Caracas, to those who previously saw few benefits of the country’s oil wealth.

He went on to claim that the Chavez policies of expropriating the capital structure of private oil companies in Venezuela would result in a more “equal” distribution of wealth in that country, something he believes is desirable everywhere. Interestingly, since Venezuela’s socialist “experiment” went south, complete with hyperinflation and one of the worst financial and economic crises ever seen in the Western Hemisphere,Stiglitz has been silent, at least when it comes to explaining why the so-called economic miracle in Venezuelawas unsustainable.

Although Stigliz no longer is lavishing praise on Venezuelan socialism, he hardly is silent about his belief that only expanded state power can “save” the U.S. economy from self-destruction. In a recent article in Scientific American, he declares that “The American Economy is Rigged.” However, he adds in the title, “And what we can do about it.”

Those familiar with the public declarations of Stiglitz, Paul Krugman, and others in the “markets are internally destructive” camp, nothing Stiglitz writes in the article is surprising. For that matter, it is pure Stiglitz to have it in Scientific American, since he can claim he is engaged in scientific discourse, something he can prove with a lot of mathematical equations that “prove” free markets are bad :

From Stiglitz’s perspective, markets are rife with failure in processing and conveying information, and government must be ready to correct these failures. In his Nobel lecture, Stiglitz spoke of having “undermined” the free-market theories of Adam Smith, asserting that Smith’s “invisible hand” either didn’t exist or had grown “palsied.” He noted that major political debates over the past two decades have tended to focus on the “efficiency of the market economy” and the “appropriate relationship between the market and the government.” His approach favored government.

Furthermore, he declared in his Nobel lecture that “perfect competition is required if markets are to be efficient” (italics his). To Austrian economists, his statement raises the question as to why we are to assume that governments somehow possess the necessary information to produce “efficient” outcomes in economic exchanges, but Stiglitz never has tried to go there. He simply assumes governmental superiority regarding information and then runs with that assumption.

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Read more: mises.org