Stiglitz: an anti-globalist hero who contradicts past Nobel winners

Lorne Gunter: National Post

Dennis Cook: The Associated Press

JOSEPH STIGLITZ: A staunch opponent of "market fundamentalism."

The rock-throwing radicals now have their own patron saint, or at least their own Nobel laureate. Joseph Stiglitz, the former chairman of President Bill Clinton's council of economic advisors and former chief economist of the World Bank, is one of three co-winners of the prestigious prize for 2001. In one of his first interviews since being told of his award last week, Mr. Stiglitz sent a message to the often violent anti-globalists who have done so much to disrupt international trade and heads-of-government summits in the last two years, in such places as Seattle, Washington, Prague, Quebec City, Gothenburg and Genoa: Keep up the pressure.

Mr. Stiglitz did not counsel violence. Yet, as a staunch opponent of what he calls "market fundamentalism" and a man who has spent much of his career attempting to create statistical justifications for government intervention in and regulation of economies, the Columbia University professor did encourage anti-globalists to "fight for a better global environment ... (and) a more equal world that would reduce the disparities between the haves and the have-nots" -- hardly the kind of rhetoric one has come to expect from one of the Swedish Academy's choices.

The selection of Mr. Stiglitz is out of character in many ways. Since the mid-1970s, the awards committee has avoided pump-priming Keynesians. It has displayed a decided preference for free-marketers, supply-siders, public choice theorists and classic liberal economists, many from the University of Chicago's famous economics school. Starting with Freidrich von Hayek in 1974, through Milton Friedman (1976), George Stigler (1982), James Buchanan, Jr. and Gary Becker (1992), the nod has typically gone to economists who have added significant new tools to the statistical analysis of economic behaviour, but who at the same time have recognized that the number of inputs, conscious and unconscious - even in the most mundane economic choices -- are too numerous to quantify. The common thread has been that since inputs cannot be reliably quantified, they cannot be centrally controlled or planned either; better to leave consumers and markets in charge of the economy than bureaucrats and finance ministers.

Mr. Stiglitz takes precisely the opposite tack. He and his co-winners Michael Spence and George Akerlof, have, independently of one another, attempted to calculate the value of "asymmetric information" in purchasing decisions. What is the effect if buyer and seller have widely disparate knowledge of product reliability or market conditions? While such work is fascinating and Mr. Stiglitz's contribution to it vital, his conclusions hardly justify his solution. He is a firm believer that because there are knowledge imbalances in many kinds of transactions, only government intervention can make markets "fair" and fully efficient.

Not only is this conclusion hardly justified by his empirical research, it seems to contradict directly the work of several recent past winners. Ronald Coase, the 1991 laureate, postulated that property rights and individual economic action were the foundations of culture-wide prosperity and government interference with either tends to prompt a corresponding decline. Robert Lucas (1995) advanced the notion that participants in an economy, whether corporate or individual, pick up far more information than even they are aware of and quickly translate it into "rational expectations" about the future consequences of current behaviours, while Robert Mundell, the 1999 recipient, is perhaps the economics world's best-known champion of free trade, tax cuts and government spending limits. Even last year's winners, James Heckman and Daniel McFadden, argued that differences in income levels resulted from factors that government skills training and welfare programs were unlikely to solve.

Since the Nobel is seen, rightly, as more than just recognition of individual achievement, and also as a signal of the prevailing wisdom in policy planning, Mr. Stiglitz's award is troubling, especially if it is followed by awards in coming years to other fans of big government.