Joseph Stiglitz

(1943- )

By Ariel Scheib

Joseph Stiglitz was born on February 9, 1943, in Gary, Indiana. From 1960 to 1963, he studied at Amherst College. He went to MIT for his fourth year as an undergraduate, where he later pursued graduate work. From 1965 to 1966, he studied at the University of Chicago after receiving a Fulbright Fellowship. In subsequent years, he taught at MIT and Yale. Stiglitz is currently a Professor at Columbia, with appointments at the Business School and the School of International and Public Affairs (SIPA), and is a co-editor of The Economists' Voice journal.

In addition to making numerous influential contributions to microeconomics, Stiglitz has played number of policy roles. He served in the Clinton Administration as the chair of the President's Council of Economic Advisors (1995–1997). At the World Bank, he served as Senior Vice President and Chief Economist (1997–2000), in the time when unprecedented protest against international economic organizations started, most prominently with the Seattle WTO meeting of 1999. He is best known for his critical views of globalization and international institutions like the International Monetary Fund (IMF). In April 2001, he had this to say about the IMF: “When a nation is down and out, the IMF takes advantage and squeezes the last pound of blood out of them. They turn up the heat until, finally, the whole cauldron blows up. It has condemned people to death. They don't care if people live or die. The policies undermine democracy...it's a little like the Middle Ages or the Opium Wars."

Stiglitz was forced out of the World Bank by then Treasury Secretary Lawrence Summers. In July 2000, Stiglitz founded the Initiative for Policy Dialogue (IPD) to help developing countries explore policy alternatives, and enable wider civic participation in economic policymaking.

Stiglitz' most famous research was on screening, a technique used by one economic agent to extract otherwise private information from another. Stiglitz was awarded the Nobel Prize for Economics in 2001 for this contribution to the theory of information asymmetries that he shared with George Akerlof and A. Michael Spence.

Along with his technical economic publications, Stiglitz is the author of Whither Socialism, a non-mathematical book providing an introduction to the theories behind economic socialism's failure in Eastern Europe, the role of imperfect information in markets, and misconceptions about how truly "free market" the free market capitalist system is. In 2002, he wrote Globalization and Its Discontents, where he asserts that the International Monetary Fund puts the interest of "its largest shareholder," the United States, above those of the poorer nations it was designed to serve. In 2003, Stiglitz published The Roaring Nineties, his analysis of the boom and bust of the 1990s.

Stiglitz’s Publications Include:

• Walsh, Carl & Stiglitz, Joseph. Economics. New York : W.W. Norton & Company, (2002).
• Walsh, Carl & Stiglitz, Joseph. Principles in Macroeconomics. New York : W.W. Norton & Company, (2002).
• Stiglitz, Joseph. Globalization and Its Discontents W. W. Norton & Company, (2002).
• Greenwald, Bruce & Stiglitz, Joseph. Towards a New Paradigm in Monetary Politics. Cambrididge: Cambridge University Press, (2003).
• Stiglitz, Joseph. The Roaring Nineties. Why We're Paying the Price for the Greediest Decade in History Penguin, (2004).

The following press release from the Royal Swedish Academy of Sciences describes Stiglitz's work:

Many markets are characterized by asymmetric information: actors on one side of the market have much better information than those on the other. Borrowers know more than lenders about their repayment prospects, managers and boards know more than shareholders about the firm's profitability, and prospective clients know more than insurance companies about their accident risk. During the 1970s, this year's Laureates laid the foundation for a general theory of markets with asymmetric information. Applications have been abundant, ranging from traditional agricultural markets to modern financial markets. The Laureates' contributions form the core of modern information economics.

Joseph Stiglitz clarified the opposite type of market adjustment, where poorly informed agents extract information from the better informed, such as the screening performed by insurance companies dividing customers into risk classes by offering a menu of contracts where higher deductibles can be exchanged for significantly lower premiums. In a number of contributions about different markets, Stiglitz has shown that asymmetric information can provide the key to understanding many observed market phenomena, including unemployment and credit rationing.

Sources: Wikipedia; Nobelprize.org; Press Release.