An imaginary seaport with a transposed Villa Medici, painted by Claude Lorrain around 1637, at the height of mercantilism

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Mercantilism is the economic doctrine in which government control of foreign trade is of paramount importance for ensuring the prosperity and military security of the state. In particular, it demands a positive balance of trade. Mercantilism dominated Western European economic policy and discourse from the 16th to late-18th centuries.^[1] Mercantilism was a cause of frequent European wars in that time and motivated colonial expansion. Mercantilist theory varied in sophistication from one writer to another and evolved over time. Favors for powerful interests were often defended with mercantilist reasoning.

Mercantilist policies have included:

• Building a network of overseas colonies
• Forbidding colonies to trade with other nations
• Monopolizing markets with staple ports;
• Promote accumulation of gold and silver
• Forbidding trade to be carried in foreign ships;
• Export subsidies;
• Maximizing the use of domestic resources;
• Restricting domestic consumption with non-tariff barriers to trade.

Jean-Baptiste Colbert's work in seventeenth century France exemplified classical mercantilism. In the English-speaking world its ideas were criticized by Adam Smith with the publication of The Wealth of Nations in 1776 and later David Ricardo with his explanation of comparative advantage. Mercantilism was rejected by Britain and France by the mid-19th century. The British Empire embraced free-trade and used its power as the financial center of the world to promote the same.

Neomercantilism is a 20th century economic policy that uses the ideas and methods of neoclassical economics. The new mercantilism has different goals and focuses on more rapid economic growth based on advanced technology. It promotes such policies as substitution state taxing, subsidizing, spending, and general regulatory powers for tariffs and quotas, and protection through the formation of supranational trading blocs.^[2]

Mercantilism in its simplest form was naive bullionism, but mercantilist writers emphasized the circulation of money and rejected hoarding. Their emphasis on monetary metals accords with current ideas regarding the money supply, such as the stimulative effect of a growing money supply. Specie concerns have since been rendered moot by fiat money and floating exchange rates. In time, the heavy emphasis on money was supplanted by industrial policy, accompanied by a shift in focus from the capacity to carry on wars to promoting general prosperity. Mature neomercantilist theory recommends selective high tariffs for "infant" industries or to promote the mutual growth of countries through national industrial specialization. Currently, advocacy of mercantilist methods for maintaining high wages in advanced economies are popular among workers in those economies, but such ideas are rejected by most policymakers and economists.

Influence[link]

This section needs additional citations for verification. Please help improve this article by adding citations to reliable sources. Unsourced material may be challenged and removed. (January 2010)

Mercantilism was the dominant school of thought in Europe throughout the late Renaissance and early modern period (from the 15th to the 18th century). Mercantilism encouraged the many intra-European wars of the period and arguably fueled European expansion and imperialism — both in Europe and throughout the rest of the world — until the 19th century or early 20th century.

Arguments have been made^{[by whom?]} for the historical promotion of mercantilism in Europe since recorded history, with authors noting the trade policies of Athens and its Delian League specifically mention^{[clarification needed]} control of value of trade in bullion as necessary for the promotion of the Greek polis. Additionally, the noted competition of medieval monarchs for control of the market town trade and of the spice trade, as well as the copious documentation of Venice, Genoa, and Pisa regarding control of the Mediterranean trade of bullion clearly points to an early understanding of mercantilistic principles. However, as a codified school, mercantilism's real birth is marked by the Empiricism of the Renaissance, which first began to quantify large-scale trade accurately.

England began the first large-scale and integrative approach to mercantilism during the Elizabethan Era (1558–1603). An early statement on national balance of trade appeared in Discourse of the Common Weal of this Realm of England, 1549: "We must always take heed that we buy no more from strangers than we sell them, for so should we impoverish ourselves and enrich them."^[3] The period featured various but often disjointed efforts by the court of Queen Elizabeth to develop a naval and merchant fleet capable of challenging the Spanish stranglehold on trade and of expanding the growth of bullion at home. Queen Elizabeth promoted the Trade and Navigation Acts in Parliament and issued Orders in Council to her Admiralty for the protection and promotion of English shipping. A systematic and coherent explanation of balance of trade was made public through Thomas Mun's c.1630 "England's treasure by forraign trade, or, The balance of our forraign trade is the rule of our treasure"^[4]

These efforts organized national resources sufficiently in the defense of England against the far larger and more powerful Spanish Empire, and in turn paved the foundation for establishing a global empire in the 19th century.^{[citation needed]} The authors noted most for establishing the English mercantilist system include Gerard de Malynes and Thomas Mun, who first articulated the Elizabethan System, which in turn was then developed further by Josiah Child. Numerous French authors helped cement French policy around mercantilism in the 17th century. This French mercantilism was best articulated by Jean-Baptiste Colbert (in office, 1665–1683), though policy liberalised greatly under Napoleon.

In Europe, academic belief in mercantilism began to fade in the late 18th century, especially in England, in light of the arguments of Adam Smith and the classical economists. The repeal of the Corn Laws by Robert Peel symbolised the emergence of free trade as an alternative system. Mercantilism never returned to popularity among economists as the principle Comparative Advantage shows the gains from international trade. However, during the Great Recession countries raised tariffs in an attempt to protect their industries, sharply reducing world trade.

Theory[link]

Most of the European economists who wrote between 1500 and 1750 are today generally considered mercantilists; this term was initially used solely by critics, such as Mirabeau and Smith, but was quickly adopted by historians. Originally the standard English term was "mercantile system". The word "mercantilism" was introduced into English from German in the early 19th century.

The bulk of what is commonly called "mercantilist literature" appeared in the 1620s in Great Britain.^[5] Smith saw English merchant Thomas Mun (1571–1641) as a major creator of the mercantile system, especially in his posthumously published Treasure by Foreign Trade (1664), which Smith considered the archetype or manifesto of the movement.^[6] Perhaps the last major mercantilist work was James Steuart’s Principles of Political Economy published in 1767.^[7]

"Mercantilist literature" also extended beyond England. For example, Italy, France, and Spain produced noted writers of mercantilist themes including Italy's Giovanni Botero (1544–1617) and Antonio Serra (1580-?); France's, Jean Bodin, Colbert and other physiocrats precursors; and the Spanish School of Salamanca writers Francisco de Vitoria (1480 or 1483–1546), Domingo de Soto (1494–1560), Martin de Azpilcueta (1491–1586), and Luis de Molina (1535–1600). Themes also existed in writers from the German historical school from List, as well as followers of the "American system" and British "free-trade imperialism," thus stretching the system into the 19th century. However, many British writers, including Mun and Misselden, were merchants, while many of the writers from other countries were public officials. Beyond mercantilism as a way of understanding the wealth and power of nations, Mun and Misselden are noted for their viewpoints on a wide range of economic matters.^[8]

Merchants in Venice

The Austrian lawyer and scholar Philipp Wilhelm von Hornick, in his Austria Over All, If She Only Will of 1684, detailed a nine-point program of what he deemed effective national economy, which sums up the tenets of mercantilism comprehensively:^[9]

• That every inch of a country's soil be utilized for agriculture, mining or manufacturing.
• That all raw materials found in a country be used in domestic manufacture, since finished goods have a higher value than raw materials.
• That a large, working population be encouraged.
• That all export of gold and silver be prohibited and all domestic money be kept in circulation.
• That all imports of foreign goods be discouraged as much as possible.
• That where certain imports are indispensable they be obtained at first hand, in exchange for other domestic goods instead of gold and silver.
• That as much as possible, imports be confined to raw materials that can be finished [in the home country].
• That opportunities be constantly sought for selling a country's surplus manufactures to foreigners, so far as necessary, for gold and silver.
• That no importation be allowed if such goods are sufficiently and suitably supplied at home.

Other than Von Hornick, there were no mercantilist writers presenting an overarching scheme for the ideal economy, as Adam Smith would later do for classical economics. Rather, each mercantilist writer tended to focus on a single area of the economy.^[10] Only later did non-mercantilist scholars integrate these "diverse" ideas into what they called mercantilism. Some scholars thus reject the idea of mercantilism completely, arguing that it gives "a false unity to disparate events". Smith saw the mercantile system as an enormous conspiracy by manufacturers and merchants against consumers, a view that has led some authors, especially Robert E. Ekelund and Robert D. Tollison to call mercantilism "a rent-seeking society". To a certain extent, mercantilist doctrine itself made a general theory of economics impossible. Mercantilists viewed the economic system as a zero-sum game, in which any gain by one party required a loss by another.^[11] Thus, any system of policies that benefited one group would by definition harm the other, and there was no possibility of economics being used to maximize the "commonwealth", or common good.^[12] Mercantilists' writings were also generally created to rationalize particular practices rather than as investigations into the best policies.^[13]

Mercantilist domestic policy was more fragmented than its trade policy. While Adam Smith portrayed mercantilism as supportive of strict controls over the economy, many mercantilists disagreed. The early modern era was one of letters patent and government-imposed monopolies; some mercantilists supported these, but others acknowledged the corruption and inefficiency of such systems. Many mercantilists also realized that the inevitable results of quotas and price ceilings were black markets. One notion mercantilists widely agreed upon was the need for economic oppression of the working population; laborers and farmers were to live at the "margins of subsistence". The goal was to maximize production, with no concern for consumption. Extra money, free time, or education for the "lower classes" was seen to inevitably lead to vice and laziness, and would result in harm to the economy.^[14]

Infinite growth[link]

The mercantilists saw a large population as a form of wealth which made possible the development of bigger markets and armies. The opposing doctrine of physiocracy predicted that mankind would outgrow its resources.

Origins[link]

Scholars debate over why mercantilism dominated economic ideology for 250 years.^[15] One group, represented by Jacob Viner, argues that mercantilism was simply a straightforward, common-sense system whose logical fallacies could not be discovered by the people of the time, as they simply lacked the required analytical tools.

The second school, supported by scholars such as Robert B. Ekelund, contends that mercantilism was not a mistake, but rather the best possible system for those who developed it. This school argues that mercantilist policies were developed and enforced by rent-seeking merchants and governments. Merchants benefited greatly from the enforced monopolies, bans on foreign competition, and poverty of the workers. Governments benefited from the high tariffs and payments from the merchants. Whereas later economic ideas were often developed by academics and philosophers, almost all mercantilist writers were merchants or government officials.^[16]

Monetarism offers a third explanation for mercantilism. European trade exported bullion to pay for goods from Asia, thus reducing the money supply and putting downward pressure on prices and economic activity. The evidence for this hypothesis is the lack of inflation in the English economy until the Revolutionary and Napoleonic wars when paper money was extensively used.

A fourth explanation lies in the increasing professionalisation and technification of the wars of the era, which turned the maintenance of adequate reserve funds (in the prospect of war) into a more and more expensive and eventually competitive business.

Mercantilism developed at a time when the European economy was in transition. Isolated feudal estates were being replaced by centralized nation-states as the focus of power. Technological changes in shipping and the growth of urban centers led to a rapid increase in international trade.^[17] Mercantilism focused on how this trade could best aid the states. Another important change was the introduction of double-entry bookkeeping and modern accounting. This accounting made extremely clear the inflow and outflow of trade, contributing to the close scrutiny given to the balance of trade.^[18] Of course, the impact of the discovery of America cannot be ignored. New markets and new mines propelled foreign trade to previously inconceivable heights. The latter led to “the great upward movement in prices” and an increase in “the volume of merchant activity itself.”^[19]

Prior to mercantilism, the most important economic work done in Europe was by the medieval scholastic theorists. The goal of these thinkers was to find an economic system that was compatible with Christian doctrines of piety and justice. They focused mainly on microeconomics and local exchanges between individuals. Mercantilism was closely aligned with the other theories and ideas that were replacing the medieval worldview. This period saw the adoption of the very Machiavellian realpolitik and the primacy of the raison d'état in international relations. The mercantilist idea that all trade was a zero sum game, in which each side was trying to best the other in a ruthless competition, was integrated into the works of Thomas Hobbes. The dark view of human nature also fit well with the Puritan view of the world, and some of the most stridently mercantilist legislation, such as the Navigation Acts, were enacted by the government of Oliver Cromwell.^[20]

Policies[link]

French finance minister and mercantilist Jean-Baptiste Colbert served for over 20 years.

Mercantilist ideas were the dominant economic ideology of all of Europe in the early modern period, and most states embraced it to a certain degree. Mercantilism was centered in England and France, and it was in these states that mercantilist polices were most often enacted.

France[link]

Mercantilism arose in France in the early 16th century, soon after the monarchy had become the dominant force in French politics. In 1539, an important decree banned the importation of woolen goods from Spain and some parts of Flanders. The next year, a number of restrictions were imposed on the export of bullion.^[21]

Over the rest of the sixteenth century further protectionist measures were introduced. The height of French mercantilism is closely associated with Jean-Baptiste Colbert, finance minister for 22 years in the 17th century, to the extent that French mercantilism is sometimes called Colbertism. Under Colbert, the French government became deeply involved in the economy in order to increase exports. Protectionist policies were enacted that limited imports and favored exports. Industries were organized into guilds and monopolies, and production was regulated by the state through a series of over a thousand directives outlining how different products should be produced.^[22]

To encourage industry, foreign artisans and craftsmen were imported. Colbert also worked to decrease internal barriers to trade, reducing internal tariffs and building an extensive network of roads and canals. Colbert's policies were quite successful, and France's industrial output and economy grew considerably during this period, as France became the dominant European power. He was less successful in turning France into a major trading power, and Britain and the Netherlands remained supreme in this field.^[22] Due to its popularity at the time Adam Smith's Wealth of Nations was banned due to its criticism of government control present in Mercantilism.^[23]

Great Britain[link]

In England, mercantilism reached its peak during the 1340-1789 Long Parliament government (1640–1660). Mercantilist policies were also embraced throughout much of the Tudor and Stuart periods, with Robert Walpole being another major proponent. In Britain, government control over the domestic economy was far less extensive than on the Continent, limited by common law and the steadily increasing power of Parliament.^[24] Government-controlled monopolies were common, especially before the English Civil War, but were often controversial.^[25]

The Anglo-Dutch Wars were fought between the English and the Dutch for control over the seas and trade routes.

With respect to its colonies, British mercantilism meant that the government and the merchants became partners with the goal of increasing political power and private wealth, to the exclusion of other empires. The government protected its merchants—and kept others out—by trade barriers, regulations, and subsidies to domestic industries in order to maximize exports from and minimize imports to the realm. The government had to fight smuggling—which became a favorite American technique in the 18th century to circumvent the restrictions on trading with the French, Spanish or Dutch. The goal of mercantilism was to run trade surpluses, so that gold and silver would pour into London. The government took its share through duties and taxes, with the remainder going to merchants in Britain. The government spent much of its revenue on a superb Royal Navy, which not only protected the British colonies but threatened the colonies of the other empires, and sometimes seized them. Thus the British Navy captured New Amsterdam (New York) in 1664. The colonies were captive markets for British industry, and the goal was to enrich the mother country.^[26]

British mercantilist writers were themselves divided on whether domestic controls were necessary. British mercantilism thus mainly took the form of efforts to control trade. A wide array of regulations was put in place to encourage exports and discourage imports. Tariffs were placed on imports and bounties given for exports, and the export of some raw materials was banned completely. The Navigation Acts expelled foreign merchants from England's domestic trade. The nation aggressively sought colonies and once under British control, regulations were imposed that allowed the colony to only produce raw materials and to only trade with Britain. This led to friction with the inhabitants of these colonies, and mercantilist policies (such as forbidding trade with other empires and controls over smuggling) were a major irritant leading to the American Revolution.

Over all, however, mercantilist policies had a positive impact on Britain helping turn it into the world's dominant trader, and an international superpower^{[citation needed]}. One domestic policy that had a lasting impact was the conversion of "waste lands" to agricultural use. Mercantilists felt that to maximize a nation's power all land and resources had to be used to their utmost, and this era thus saw projects like the draining of The Fens.^[27]

Mercantilism helped create trade patterns such as the triangular trade in the North Atlantic, in which raw materials were imported to the metropolis and then processed and redistributed to other colonies.

Other countries[link]

The other nations of Europe also embraced mercantilism to varying degrees. The Netherlands, which had become the financial center of Europe by being its most efficient trader, had little interest in seeing trade restricted and adopted few mercantilist policies. Mercantilism became prominent in Central Europe and Scandinavia after the Thirty Years' War (1618–1648), with Christina of Sweden, Jacob Kettler of Courland, Christian IV of Denmark being notable proponents. The Habsburg Holy Roman Emperors had long been interested in mercantilist policies, but the vast and decentralized nature of their empire made implementing such notions difficult.

Some constituent states of the empire did embrace Mercantilism, most notably Prussia, which under Frederick the Great had perhaps the most rigidly controlled economy in Europe. During the economic collapse of the seventeenth century Spain had little coherent economic policy, but French mercantilist policies were imported by Philip V with some success. Russia under Peter I (Peter the Great) attempted to pursue mercantilism, but had little success because of Russia's lack of a large merchant class or an industrial base.

Wars and imperialism[link]

Mercantilism was economic warfare and was well suited to an era of military warfare.^[28] Since the level of world trade was viewed as fixed, it followed that the only way to increase a nation's trade was to take it from another. A number of wars, most notably the Anglo-Dutch Wars and the Franco-Dutch Wars, can be linked directly to mercantilist theories. Most wars had other causes but they reinforced mercantilism by clearly defining the enemy, and justified damage to the enemy's economy.

Mercantilism fueled the imperialism of this era, as many nations expended significant effort to build new colonies that would be sources of gold (as in Mexico) or sugar (as in the West Indies), as well as becoming exclusive markets. European power spread around the globe, often under the aegis of companies with government-guaranteed monopolies in certain defined geographical regions, such as the Dutch East India Company or the British Hudson's Bay Company (operating in present-day Canada).

Criticisms[link]

Much of Adam Smith's The Wealth of Nations is an attack on mercantilism.

Adam Smith and David Hume were the founding fathers of anti-mercantilist thought. A number of scholars found important flaws with mercantilism long before Adam Smith developed an ideology that could fully replace it. Critics like Hume, Dudley North, and John Locke undermined much of mercantilism, and it steadily lost favor during the 18th century.

In 1690, John Locke argued that prices vary in proportion to the quantity of money. Locke's Second Treatise also points towards the heart of the anti-mercantilist critique: that the wealth of the world is not fixed, but is created by human labor (represented embryonically by Locke's labor theory of value). Mercantilists failed to understand the notions of absolute advantage and comparative advantage (although this idea was only fully fleshed out in 1817 by David Ricardo) and the benefits of trade.^[29]

For instance, suppose Portugal was a more efficient producer of wine than England, yet in England cloth could be produced more efficiently than it could in Portugal. Thus if Portugal specialized in wine and England in cloth, both states would end up better off if they traded. This is an example of the reciprocal benefits of trade due to a comparative advantage. In modern economic theory, trade is not a zero-sum game of cutthroat competition because both sides can benefit.

Hume famously noted the impossibility of the mercantilists' goal of a constant positive balance of trade^{[citation needed]}. As bullion flowed into one country, the supply would increase and the value of bullion in that state would steadily decline relative to other goods. Conversely, in the state exporting bullion, its value would slowly rise. Eventually it would no longer be cost-effective to export goods from the high-price country to the low-price country, and the balance of trade would reverse itself. Mercantilists fundamentally misunderstood this, long arguing that an increase in the money supply simply meant that everyone gets richer.^[30]

The importance placed on bullion was also a central target, even if many mercantilists had themselves begun to de-emphasize the importance of gold and silver. Adam Smith noted at the core of the mercantile system was the "popular folly of confusing wealth with money," bullion was just the same as any other commodity, and there was no reason to give it special treatment.^[31] More recently, scholars have discounted the accuracy of this critique. They believe Mun and Misselden were not making this mistake in the 1620s, and point to their followers Josiah Child and Charles Davenant, who, in 1699, wrote: "Gold and Silver are indeed the Measure of Trade, but that the Spring and Original of it, in all nations is the Natural or Artificial Product of the Country; that is to say, what this Land or what this Labour and Industry Produces."^[32] The critique that mercantilism was a form of rent-seeking has also seen criticism, as scholars such Jacob Viner in the 1930s point out that merchant mercantilists such as Mun understood that they would not gain by higher prices for English wares abroad.^[33]

The first school to completely reject mercantilism was the physiocrats, who developed their theories in France. Their theories also had several important problems, and the replacement of mercantilism did not come until Adam Smith published The Wealth of Nations in 1776. This book outlines the basics of what is today known as classical economics. Smith spends a considerable portion of the book rebutting the arguments of the mercantilists, though often these are simplified or exaggerated versions of mercantilist thought.^[16]

Scholars are also divided over the cause of mercantilism's end. Those who believe the theory was simply an error hold that its replacement was inevitable as soon as Smith's more accurate ideas were unveiled. Those who feel that mercantilism was rent-seeking hold that it ended only when major power shifts occurred. In Britain, mercantilism faded as the Parliament gained the monarch's power to grant monopolies. While the wealthy capitalists who controlled the House of Commons benefited from these monopolies, Parliament found it difficult to implement them because of the high cost of group decision making.^[34]

Mercantilist regulations were steadily removed over the course of the Eighteenth Century in Britain, and during the 19th century the British government fully embraced free trade and Smith's laissez-faire economics. On the continent, the process was somewhat different. In France economic control remained in the hands of the royal family and mercantilism continued until the French Revolution. In Germany mercantilism remained an important ideology in the 19th and early 20th centuries, when the historical school of economics was paramount.^[35]

Legacy[link]

Adam Smith rejected the mercantilist focus on production, arguing that consumption was paramount to production. He added that mercantilism was popular among merchants because it was what is now called "rent seeking".^[36] However John Maynard Keynes argued that encouraging production was just as important as consumption,and he favoured the "new mercantilism". Keynes also noted that in the early modern period the focus on the bullion supplies was reasonable. In an era before paper money, an increase for bullion was one of the few ways to increase the money supply. Keynes said mercantilist policies generally improved both domestic and foreign investment. Domestic because the policies lowered the domestic rate of interest. And it increased investment by foreigners in the nation by tending to create a favorable balance of trade.^[37]

Keynes and other economists of the 20th century also realized the balance of payments is an important concern. Since the 1930s, all nations have closely monitored the inflow and outflow of capital, and most economists agree that a favorable balance of trade is desirable.^{[citation needed]} Keynes also supported government intervention in the economy as necessity, as did mercantilism.^[38]

As of 2010^[update], the word "mercantilism" remains a pejorative term, often used to attack various forms of protectionism.^[39] The similarities between Keynesianism, and its successor ideas, with mercantilism have sometimes led critics to call them neo-mercantilism. Indeed, Paul Samuelson, writing within a Keynesian framework, defended mercantilism, writing: "With employment less than full and Net National Product suboptimal, all the debunked mercantilist arguments turn out to be valid."^[40]

Some other systems that do copy several mercantilist policies, such as Japan's economic system, are also sometimes called neo-mercantilist.^[41] In an essay appearing in the 14 May 2007 issue of Newsweek, business columnist Robert J. Samuelson argued that China was pursuing an essentially mercantilist trade policy that threatened to undermine the post-World War II international economic structure.^[42]

Murray Rothbard, representing the Austrian School of economics, describes it this way:

In one area economists rejected Smith well before Keynes: in the use of data. Mercantilists, who were generally merchants or government officials, gathered vast amounts of trade data and used it extensively in their research and writing. William Petty, a strong mercantilist, is generally credited with being the first to use empirical analysis to study the economy. Smith rejected this, arguing that deductive reasoning from base principles was the proper method to discover economic truths. Today, many schools of economics accept that both methods are important.

In specific instances, protectionist mercantilist policies also had an important and positive impact on the state that enacted them. Adam Smith himself, for instance, praised the Navigation Acts as they greatly expanded the British merchant fleet, and played a central role in turning Britain into the naval and economic superpower from the 18th Century onward.^[44] Some economists thus feel that protecting infant industries, while causing short-term harm, can be beneficial in the long term.

Nonetheless, the publication of The Wealth of Nations in 1776 had a profound impact on the end of the mercantilist era^[when?] and the later adoption of free-market policy. By 1860, England removed the last vestiges of the mercantile era. Industrial regulations, monopolies and tariffs were withdrawn.^{[citation needed]}

Reverse-mercantilism[link]

Reverse-mercantilism^[45] is an economic system which strives to increase corporate wealth and monopoly by subsidizing some corporate entities while regulating, taxing and controlling borders (blocking outsourcing and creating tariffs) for all competitors.

Notes[link]

References[link]

• Mercantilism, The Concise Encyclopedia of Economics, http://www.econlib.org/library/Enc/Mercantilism.html, retrieved 2010-03-14 
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• Braudel, Fernand (1979), "The Wheels of Commerce", Civilization and Capitalism 15th-18th Century 
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• Magnusson, Lars G. (2003), "Mercantilism", in Samuels, Warren J.; Biddle, Jeff E.; Davis, Jon B., A Companion to the History of Economic Thought, Malden, MA: Blackwell Publishing, ISBN 0-631-22573-0 
• Markwell, Donald (2006), John Maynard Keynes and International Relations: Economic Paths to War and Peace, Oxford & New York: Oxford University Press, ISBN 978-0-19-829236-4 
• Nester, R. (2000), The Great Frontier War: Britain, France, and the Imperial Struggle for North America, 1607-1755, Praeger, ISBN 978-0-275-96772-7 
• Niehans, Jürg (1990), A History of Economic Theory: Classic Contributions, 1720–1980, Baltimore, MD: Johns Hopkins University Press, ISBN 0-8018-3834-7 
• Omrund, David (2003), The rise of commercial empires: England and the Netherlands in the Age of Mercantilism, 1650-1770 
• Rothbard, Murray (1997), Mercantilism: A Lesson for Our Times?, Cheltenham, England: Edward Elgar 
• Samuelson, Paul (May, 1964), "Theoretical notes on trade problems", The Review of Economics and Statistics, http://www.jstor.org/pss/1928178 
• Samuelson, Robert J. (17 May 2007), China's Wrong Turn on Trade, Newsweek, http://www.newsweek.com/id/34952, retrieved 2007-12-06 
• Spiegel, Henry William (1991), The growth of economic thought (3rd ed.), Duke University Press, ISBN 978-0-8223-0973-4 
• Vaggi, Peter; Groenewegen (2003), A Concise History of Economic Thought: From Mercantilism to Monetarism, New York: Palgrave Macmillan, ISBN 0-333-99936-3 
• Walters, Robert S.; Blake, David H. (1976), The Politics of Global Economic Relations, Englewood Cliffs, NJ: Prentice-Hall, ISBN 0-13-684712-9 
• Williams, E. N. (1999), The Ancién Regime in Europe: government and society in the major states 1648—1789, London: Pimlico, ISBN 0-7126-5934-X 
• Wilson, Charles (1963) [1958], Mercantilism, London: Routledge and Kegan Paul 

External links[link]

• Thomas Mun's Englands Treasure by Forraign Trade
• Book IV of The Wealth of Nations, Adam Smith's attack on the Mercantile System
• Mercantilism List of references

This article may require cleanup to meet Wikipedia's quality standards. No cleanup reason has been specified. Please help improve this article if you can; the talk page may contain suggestions. (January 2010)

Joseph Stiglitz ForMemRS FBA
17th Chair of the Council of Economic Advisors
In office June 28, 1995 – February 13, 1997
President	Bill Clinton
Preceded by	Laura Tyson
Succeeded by	Janet Yellen
World Bank Chief Economist
In office 1997–2000
Preceded by	Michael Bruno
Succeeded by	Nicholas Stern
Personal details
Born	(1943-02-09) February 9, 1943 (age 69) Gary, Indiana
Political party	Democratic
Spouse(s)	Anya Schiffrin
Alma mater	Amherst College Massachusetts Institute of Technology
Profession	Economist

Joseph Eugene Stiglitz, ForMemRS, FBA, (born February 9, 1943) is an American economist and a professor at Columbia University. He is a recipient of the Nobel Memorial Prize in Economic Sciences (2001) and the John Bates Clark Medal (1979). He is also the former Senior Vice President and Chief Economist of the World Bank. He is known for his critical view of the management of globalization, free-market economists (whom he calls "free market fundamentalists") and some international institutions like the International Monetary Fund and the World Bank.

In 2000, Stiglitz founded the Initiative for Policy Dialogue (IPD), a think tank on international development based at Columbia University. Since 2001, he has been a member of the Columbia faculty, and has been a University Professor since 2003. He also chairs the University of Manchester's Brooks World Poverty Institute and is a member of the Pontifical Academy of Social Sciences. Stiglitz is an honorary doctor of Durham Business School,^[1] an honorary doctor at the Charles University, an honorary professor at Tsinghua University School of Public Policy and Management and a member of the Executive and Supervisory Committee (ESC)^[2] of CERGE-EI in Prague. Stiglitz is one of the most frequently cited economists in the world.^[3]

Biography[link]

Stiglitz was born in Gary, Indiana, to Jewish parents, Charlotte and Nathaniel Stiglitz. From 1960 to 1963, he studied at Amherst College, where he was a highly active member of the debate team and President of the Student Government. He went to the Massachusetts Institute of Technology (MIT) for his fourth year as an undergraduate, where he later pursued graduate work. His undergraduate degree was awarded from Amherst College. From 1965 to 1966, he moved to the University of Chicago to do research under Hirofumi Uzawa who had received an NSF grant. He studied for his PhD from MIT from 1966 to 1967, during which time he also held an MIT assistant professorship. Stiglitz stated that the particular style of MIT economics suited him well - simple and concrete models, directed at answering important and relevant questions.^[4] From 1966 to 1970 he was a research fellow at the University of Cambridge: he arrived at Fitzwilliam House as a Fulbright Scholar in 1965 and then won a Tapp Junior Research Fellowship at Gonville and Caius College.^[5] In subsequent years, he held academic positions at Yale, Stanford, Duke, Oxford, and Princeton.^[6] Stiglitz is now a Professor at Columbia University, with appointments at the Business School, the Department of Economics and the School of International and Public Affairs (SIPA), and is editor of The Economists' Voice journal with J. Bradford DeLong and Aaron Edlin. He also gives classes for a double-degree program between Sciences Po Paris and École Polytechnique in 'Economics and Public Policy'. As of 2005 he chairs The Brooks World Poverty Institute at the University of Manchester.^[7][8] Stiglitz is a New-Keynesian economist.^[9][10]

In addition to making numerous influential contributions to microeconomics, Stiglitz has played a 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 was fired by the World Bank for expressing dissent with its policies.^[11] He was a lead author for the Intergovernmental Panel on Climate Change.

He is a member of Collegium International, an organization of leaders with political, scientific, and ethical expertise whose goal is to provide new approaches in overcoming the obstacles in the way of a peaceful, socially just and an economically sustainable world. He is also a member of the scientific committee of the Fundacion IDEAS, a Spanish think tank.^[12]

Stiglitz has advised American President Barack Obama, but has also been sharply critical of the Obama Administration's financial-industry rescue plan.^[13] Stiglitz said that whoever designed the Obama administration's bank rescue plan is "either in the pocket of the banks or they’re incompetent."^[14]

In October 2008 he was asked by the President of UN's General Assembly to chair a commission entrusted with drafting a report on the reasons for and solutions to the financial crisis.^[15] In response, the commission produced the Stiglitz Report.

On July 25, 2011, Stiglitz participated to the "I Foro Social del 15M" organized in Madrid (Spain) expressing his support to the 2011 Spanish protests.^[16]

In 2011, he was named by Foreign Policy magazine on its list of top global thinkers.^[17]

Contributions to economics[link]

Stiglitz at a conference in Mexico in 2009.

Information asymmetry[link]

This section cites its sources but does not provide page references. You can help to improve it by introducing citations that are more precise.

Stiglitz's most famous research was on screening, a technique used by one economic agent to extract otherwise private information from another. It was for this contribution to the theory of information asymmetry that he shared the Nobel Memorial Prize in Economics^[4] in 2001 "for laying the foundations for the theory of markets with asymmetric information" with George A. Akerlof and A. Michael Spence.

Before the advent of models of imperfect and asymmetric information, the traditional neoclassical economics literature had assumed that markets are efficient except for some limited and well defined market failures. More recent work by Stiglitz and others reversed that presumption, to assert that it is only under exceptional circumstances that markets are efficient. Stiglitz has shown (together with Bruce Greenwald) that "whenever markets are incomplete and/or information is imperfect (which are true in virtually all economies), even competitive market allocation is not constrained Pareto efficient". In other words, they addressed "the problem of determining when tax interventions are Pareto-improving. The approach indicates that such tax interventions almost always exist and that equilibria in situations of imperfect information are rarely constrained Pareto optima."^{[18]:229, abstract} Although these conclusions and the pervasiveness of market failures do not necessarily warrant the state intervening broadly in the economy, it makes clear that the "optimal" range of government recommendable interventions is definitely much larger than the traditional "market failure" school recognizes.^[19] For Stiglitz, there is no such thing as an invisible hand.^[20] According to Stiglitz:^[21]

Whenever there are "externalities"—where the actions of an individual have impacts on others for which they do not pay or for which they are not compensated—markets will not work well. But recent research has shown that these externalities are pervasive, whenever there is imperfect information or imperfect risk markets—that is always. The real debate today is about finding the right balance between the market and government. Both are needed. They can each complement each other. This balance will differ from time to time and place to place.

In the opening remarks for his prize acceptance "Aula Magna",^[22] Stiglitz said:^[23]

I hope to show that Information Economics represents a fundamental change in the prevailing paradigm within economics. Problems of information are central to understanding not only market economics but also political economy, and in the last section of this lecture, I explore some of the implications of information imperfections for political processes.

In an interview in 2007, Stiglitz explained further:^[24]

The theories that I (and others) helped develop explained why unfettered markets often not only do not lead to social justice, but do not even produce efficient outcomes. Interestingly, there has been no intellectual challenge to the refutation of Adam Smith's invisible hand: individuals and firms, in the pursuit of their self-interest, are not necessarily, or in general, led as if by an invisible hand, to economic efficiency.

Efficiency wages: the Shapiro-Stiglitz model[link]

In the Shapiro-Stiglitz model of efficiency wages, workers are paid at a level that dissuades shirking. This prevents wages from dropping to market clearing levels. Full employment cannot be achieved because workers would shirk if they were not threatened with the possibility of unemployment. Because of this, the curve for the no-shirking condition (labeled NSC) goes to infinity at full employment.

Stiglitz also did research on efficiency wages, and helped create what became known as the "Shapiro-Stiglitz model" to explain why there is unemployment even in equilibrium, why wages are not bid down sufficiently by job seekers (in the absence of minimum wages) so that everyone who wants a job finds one, and to question whether the neoclassical paradigm could explain involuntary unemployment.^[25] The answer to these puzzles was proposed by Shapiro and Stiglitz in 1984: "Unemployment is driven by the information structure of employment".^[25] Two basic observations undergird their analysis:

1. Unlike other forms of capital, humans can choose their level of effort.
2. It is costly for firms to determine how much effort workers are exerting.

A full description of this model can be found at the links provided.^[26] Some key implications of this model are:

1. Wages do not fall enough during recessions to prevent unemployment from rising. If the demand for labour falls, this lowers wages. But because wages have fallen, the probability of 'shirking' (workers not exerting effort) has risen. If employment levels are to be maintained, through a sufficient lowering of wages, workers will be less productive than before through the shirking effect. As a consequence, in the model wages do not fall enough to maintain employment levels at the previous state, because firms want to avoid excessive shirking by their workers. So, unemployment must rise during recessions, because wages are kept 'too high'.
2. Possible corollary: Wage sluggishness. Moving from one private cost of hiring <w∗> to another private cost of hiring <w∗∗> will require each firm to repeatedly re-optimize wages in response to shifting unemployment rate. Firms cannot cut wages until unemployment rises sufficiently (a coordination problem).

The outcome is never Pareto efficient.

1. Each firm employs too few workers because it faces private cost of hiring rather than the social cost — which is equal to and in all cases. This means that firms do not "internalize" the "external" cost of unemployment - they do not factor how large-scale unemployment harms society when assessing their own costs. This leads to a negative externality as marginal social cost exceeds the firm's marginal cost (MSC = Firm's Private Marginal Cost + Marginal External Cost of increased social unemployment)^{[clarification needed]}
2. There are also negative externalities. Each firm increases the asset value of unemployment <Vu> for all other firms by hiring.^{[clarification needed]} But the first problem clearly dominates since the 'natural rate of unemployment' is always too high.

Some possible practical implications of Stiglitz theorems[link]

While the mathematical validity of Stiglitz et al. theorems are not in question, their practical implications in political economy and their application in real life economic policies have been subject to considerable disagreement and debate.^[27] Stiglitz himself seems to be continuously adapting his own political-economic discourse,^[28] as we can see from the evolution in his positions as initially stated in Whither Socialism? (1994) to his own new positions held on his most recent publications.

Once incomplete and imperfect information are introduced, Chicago-school defenders of the market system cannot sustain descriptive claims of the Pareto efficiency of the real world. Thus, Stiglitz's use of rational-expectations equilibrium assumptions to achieve a more realistic understanding of capitalism than is usual among rational-expectations theorists leads, paradoxically, to the conclusion that capitalism deviates from the model in a way that justifies state action—socialism—as a remedy.^[29]

The effect of Stiglitz's influence is to make economics even more presumptively interventionist than Samuelson preferred. Samuelson treated market failure as the exception to the general rule of efficient markets. But the Greenwald-Stiglitz theorem posits market failure as the norm, establishing "that government could potentially almost always improve upon the market's resource allocation." And the Sappington-Stiglitz theorem "establishes that an ideal government could do better running an enterprise itself than it could through privatization"^[30] (Stiglitz 1994, 179).^[29]

The objections to the wide adoption of these positions suggested by Stiglitz's discoveries do not come from economics itself but mostly from political scientists and are in the fields of sociology. As David L. Prychitko discusses in his "critique" to Whither Socialism? (see below), although Stiglitz's main economic insight seems generally correct, it still leaves open great constitutional questions such as how the coercive institutions of the government should be constrained and what the relation is between the government and civil society.^[31]

Government[link]

Clinton administration, 1993–1997[link]

Stiglitz joined the Clinton Administration in 1993,^[32] serving first as a member during 1993-1995, and then appointed Chairman of the Council of Economic Advisers on June 28, 1995, in which capacity he also served as a member of the cabinet. He became deeply involved in environmental issues, which included serving on the Intergovernmental Panel on Climate Change, and helping draft a new law for toxic wastes (which was never passed).

Stiglitz's most important contribution in this period was helping define a new economic philosophy, a "third way", which postulated the important, but limited, role of government, that unfettered markets often did not work well, but that government was not always able to correct the limitations of markets. The academic research that he had been conducting over the preceding 25 years provided the intellectual foundations for this "third way".

When President Bill Clinton was re-elected, he asked Stiglitz to continue to serve as Chairman of the Council of Economic Advisers for another term. But he had already been approached by the World Bank to be its senior vice president for development policy and its chief economist, and he assumed that position after his CEA successor was confirmed on February 13, 1997.

As the World Bank began its ten-year review of the transition of the former Communist countries to the market economy it unveiled failures of the countries that had followed the International Monetary Fund (IMF) shock therapy policies - both in terms of the declines in GDP and increases in poverty - that were even worse than the worst that most of its critics had envisioned at the onset of the transition. Clear links existed between the dismal performances and the policies that the IMF had advocated, such as the voucher privatization schemes and excessive monetary stringency. Meanwhile, the success of a few countries that had followed quite different strategies suggested that there were alternatives that could have been followed. The U.S. Treasury had put enormous pressure on the World Bank to silence his criticisms of the policies which they and the IMF had pursued.^[33][34]

Stiglitz always had a poor relationship with Treasury Secretary Lawrence Summers.^[35] In 2000, Summers successfully petitioned for Stiglitz's removal, supposedly in exchange for World Bank President James Wolfensohn's re-appointment – an exchange that Wolfensohn denies took place. Whether Summers ever made such a blunt demand is questionable – Wolfensohn claims he would "have told him to fuck himself".^[36]

Stiglitz resigned from the World Bank in January 2000, a month before his term expired.^[34] The Bank's president, James Wolfensohn, announced Stiglitz's resignation in November 1999 and also announced that Stiglitz would stay on as "special advisor to the president", and would chair the search committee for a successor.

"Joseph E. Stiglitz said today [Nov. 24, 1999] that he would resign as the World Bank's chief economist after using the position for nearly three years to raise pointed questions about the effectiveness of conventional approaches to helping poor countries."^[37]

In this role, he continued criticism of the IMF, and, by implication, the US Treasury Department. In April 2000, in an article for The New Republic, he wrote:

"They’ll say the IMF is arrogant. They’ll say the IMF doesn’t really listen to the developing countries it is supposed to help. They’ll say the IMF is secretive and insulated from democratic accountability. They’ll say the IMF's economic ‘remedies’ often make things worse – turning slowdowns into recessions and recessions into depressions. And they’ll have a point. I was chief economist at the World Bank from 1996 until last November, during the gravest global economic crisis in a half-century. I saw how the IMF, in tandem with the U.S. Treasury Department, responded. And I was appalled."

The article was published a week before the annual meetings of the World Bank and IMF and provoked a strong response. It proved too strong for Summers and, yet more lethally, Stiglitz's protector-of-sorts at the World Bank, Wolfensohn. Wolfensohn had privately empathised with Stiglitz's views, but this time was worried for his second term, which Summers had threatened to veto.^{[citation needed]} Stanley Fisher, deputy managing director of the IMF, called a special staff meeting and informed at that gathering that Wolfensohn had agreed to fire Stiglitz. Meanwhile, the Bank's External Affairs department told the press that Stiglitz had not been fired, his post had merely been abolished.^[38]

In a September 19, 2008 radio interview with Aimee Allison and Philip Maldari on Pacifica Radio's KPFA 94.1 FM in Berkeley, California, Stiglitz implied that President Clinton and his economic advisors would not have backed the North American Free Trade Agreement (NAFTA) had they been aware of stealth provisions, inserted by lobbyists, that they overlooked.

Initiative for Policy Dialogue[link]

In July 2000 Stiglitz founded the Initiative for Policy Dialogue (IPD), with support of the Ford, Rockefeller, McArthur, and Mott Foundations and the Canadian and Swedish governments, to enhance democratic processes for decision-making in developing countries and to ensure that a broader range of alternatives are on the table and more stakeholders are at the table.

Commission on the Measurement of Economic Performance and Social Progress[link]

At the beginning of 2008, Stiglitz chaired the Commission on the Measurement of Economic Performance and Social Progress, also known as the Stiglitz-Sen-Fitoussi Commission, initiated by President Sarkozy of France. The Commission held its first plenary meeting on 22–23 April 2008 in Paris. Its final report was made public on 14 September 2009.^[39]

Commission of Experts on Reforms of the International Monetary and Financial System[link]

Stiglitz at the World Economic Forum Annual Meeting in Davos, 2009.

In 2009, Stiglitz chaired the Commission of Experts on Reforms of the International Monetary and Financial System which was convened by the President of the United Nations General Assembly "to review the workings of the global financial system, including major bodies such as the World Bank and the IMF, and to suggest steps to be taken by Member States to secure a more sustainable and just global economic order".^[40] Its final report was released on 21 September 2009.^[41][42]

Eurozone crisis[link]

During a 2010 BBC interview, Stiglitz argued that Europe should make a clear statement of belief in social solidarity and that they should 'stand behind Greece'.^{[citation needed]}

In 2012, Stiglitz described the European austerity plans as a "suicide-pact."^[43]

Support to the 2011 Spanish Protests[link]

On July 25, 2011, Stiglitz participated to the "I Foro Social del 15M" organized in Madrid (Spain) expressing his support to the 2011 Spanish protests.^[16] During an informal speech, he made a brief review of some of the problems in Europe and in the United States, the serious unemployment rate and the situation in Greece. "This is an opportunity for economic contribution social measures", argued Stiglitz, who made a critical speech about the way authorities are handling the political exit to the crisis. He encouraged those present to respond to the "bad ideas", not with indifference, but with "good ideas". "This does not work, you have to change it", he said.

Criticism of rating agencies[link]

Stiglitz has been critical of rating agencies describing them as the "key culprit" in the financial crisis noting "they were the party that performed the alchemy that converted the securities from F-rated to A-rated. The banks could not have done what they did without the complicity of the rating agencies."^[44]

Books[link]

Along with his technical economic publications (he has published over 300 technical articles), Stiglitz is the author of books on issues from patent law to abuses in international trade.

[edit] Freefall: America, Free Markets, and the Sinking of the World Economy (2010)

In Freefall: America, Free Markets, and the Sinking of the World Economy, Stiglitz discusses the causes of the 2008 recession/depression and goes on to propose reforms needed to avoid a repetition of a similar crisis, advocating government intervention and regulation in a number of areas. Among the policy-makers he criticises are George W. Bush, Larry Summers, and Barack Obama.^[45]

This book does not require an economics background in order to be of value to the reader. Rather it explains Stiglitz's views on the recent economic crisis in terms which make it relevant to the average homeowner, retirement investor, and voter in the United States. He explains how without fundamental changes in economic policy and regulation the position of the US in the world political and economic arena may deteriorate significantly.

[edit] The Three Trillion Dollar War: The True Cost of the Iraq Conflict (2008)

The Three Trillion Dollar War (co-authored with Linda Bilmes) examines the full cost of the Iraq War, including many hidden costs. The book also discusses the extent to which these costs will be imposed for many years to come, paying special attention to the enormous expenditures that will be required to care for very large numbers of wounded veterans. Stiglitz was openly critical of George W. Bush at the time the book was released.^[46]

[edit] Stability with Growth: Macroeconomics, Liberalization and Development (2006)

In Stability with Growth: Macroeconomics, Liberalization and Development, Stiglitz, José Antonio Ocampo (United Nations Under-Secretary-General for Economic and Social Affairs, until 2007), Shari Spiegel (Managing Director, Initiative for Policy Dialogue - IPD), Ricardo Ffrench-Davis (Main Adviser, Economic Commission for Latin America and the Caribbean - ECLAC) and Deepak Nayyar (Vice Chancellor, University of Delhi) discuss the current debates on macroeconomics, capital market liberalization and development, and develop a new framework within which one can assess alternative policies. They explain their belief that the Washington Consensus has advocated narrow goals for development (with a focus on price stability) and prescribed too few policy instruments (emphasizing monetary and fiscal policies), and places unwarranted faith in the role of markets. The new framework focuses on real stability and long-term sustainable and equitable growth, offers a variety of non-standard ways to stabilize the economy and promote growth, and accepts that market imperfections necessitate government interventions. Policy-makers have pursued stabilization goals with little concern for growth consequences, while trying to increase growth through structural reforms focused on improving economic efficiency. Moreover, structural policies, such as capital market liberalization, have had major consequences for economic stability. This book challenges these policies by arguing that stabilization policy has important consequences for long-term growth and has often been implemented with adverse consequences. The first part of the book introduces the key questions and looks at the objectives of economic policy from different perspectives. The third part presents a similar analysis for capital market liberalization.

[edit] Making Globalization Work (2006)

Making Globalization Work surveys the inequities of the global economy, and the mechanisms by which developed countries exert an excessive influence over developing nations. Dr. Stiglitz argues that through tariffs, subsidies, an over-complex patent system and pollution, the world is being both economically and politically destabilised. Stiglitz argues that strong, transparent institutions are needed to address these problems. He shows how an examination of incomplete markets can make corrective government policies desirable.

Stiglitz is an exception to the general pro-globalization view of professional economists, according to economist Martin Wolf.^[47] Stiglitz argues that economic opportunities are not widely enough available, that financial crises are too costly and too frequent, and that the rich countries have done too little to address these problems. Making Globalization Work^[48] has sold more than two million copies.

[edit] Fair Trade for All (2005)

In Fair Trade for All, authors Stiglitz and Andrew Charlton argue that it is important to make the trading world more development friendly.^[49] The idea is put forth that the present regime of tariffs and agricultural subsidies is dominated by the interests of former colonial powers and needs to change. The removal of the bias toward the developed world will be beneficial to both developing and developed nations. The developing world is in needs of assistance, and this can only be achieved when developed nations abandon mercantilist based priorities and work towards a more liberal world trade regime.^[50]

[edit] New Paradigm for Monetary Economics (2004)

[edit] The Roaring Nineties: A New History of the World's Most Prosperous Decade (2003)

The Roaring Nineties" is Stiglitz' analysis of the boom and bust of the 1990s. Presented from an insider's point of view, firstly as chair of President Clinton's Council of Economic Advisors, and later as chief economist of the World Bank, it continues his argument on how misplaced faith in free-market ideology led to the global economic issues of today, with a perceptive focus on US policies.

[edit] Globalization and Its Discontents (2002)

In Globalization and Its Discontents, Stiglitz argues that what are often called "developing economies" are, in fact, not developing at all, and puts much of the blame on the IMF.

Stiglitz bases his argument on the themes that his decades of theoretical work have emphasized: namely, what happens when people lack the key information that bears on the decisions they have to make, or when markets for important kinds of transactions are inadequate or don't exist, or when other institutions that standard economic thinking takes for granted are absent or flawed. Stiglitz stresses the point: "Recent advances in economic theory" (in part referring to his own work) "have shown that whenever information is imperfect and markets incomplete, which is to say always, and especially in developing countries, then the invisible hand works most imperfectly." As a result, Stiglitz continues, governments can improve the outcome by well-chosen interventions. Stiglitz argues that when families and firms seek to buy too little compared to what the economy can produce, governments can fight recessions and depressions by using expansionary monetary and fiscal policies to spur the demand for goods and services. At the microeconomic level, governments can regulate banks and other financial institutions to keep them sound. They can also use tax policy to steer investment into more productive industries and trade policies to allow new industries to mature to the point at which they can survive foreign competition. And governments can use a variety of devices, ranging from job creation to manpower training to welfare assistance, to put unemployed labor back to work and cushion human hardship.

Stiglitz complains bitterly that the IMF has done great damage through the economic policies it has prescribed that countries must follow in order to qualify for IMF loans, or for loans from banks and other private-sector lenders that look to the IMF to indicate whether a borrower is creditworthy. The organization and its officials, he argues, have ignored the implications of incomplete information, inadequate markets, and unworkable institutions—all of which are especially characteristic of newly developing countries. As a result, Stiglitz argues, the IMF has often called for policies that conform to textbook economics but do not make sense for the countries to which the IMF is recommending them. Stiglitz seeks to show that these policies have been disastrous for the countries that have followed them.

[edit] Whither Socialism?

Whither Socialism? is based on Stiglitz's Wicksell Lectures, presented at the Stockholm School of Economics in 1990 and presents a summary of information economics and the theory of markets with imperfect information and imperfect competition, as well as being a critique of both free market and market socialist approaches (see Roemer critique, op. cit.). Stiglitz explains how the neoclassical, or Walrasian model ("Walrasian economics" refers to the result of the process which has given birth to a formal representation of Adam Smith's notion of the "invisible hand", along the lines put forward by Léon Walras and encapsulated in the general equilibrium model of Arrow-Debreu), may have wrongly encouraged the belief that market socialism could work. Stiglitz proposes an alternative model, based on the information economics established by the Greenwald-Stiglitz theorems.

One of the reasons Stiglitz sees for the critical failing in the standard neoclassical model, on which market socialism was built, is its failure to consider the problems that arise from lack of perfect information and from the costs of acquiring information. He also identifies problems arising from its assumptions concerning completeness.^[51]

Papers and conferences[link]

Stiglitz wrote a series of papers and held a series of conferences explaining how such information uncertainties may have influence on everything from unemployment to lending shortages. As the chairman of the Council of Economic Advisers during the first term of the Clinton Administration and former chief economist at the World Bank, Stiglitz was able to put some of his views into action. For example, he was an outspoken critic of quickly opening up financial markets in developing countries. These markets rely on access to good financial data and sound bankruptcy laws, but he argued that many of these countries didn't have the regulatory institutions needed to ensure that the markets would operate soundly.

He co-authored a paper titled "Implications of the New Fannie Mae and Freddie Mac Risk-Based Capital Standard" with Peter Orszag in 2002 in which they concluded "on the basis of historical experience, the risk to the government from a potential default on GSE debt is effectively zero."^[52]

Private life[link]

Stiglitz married for the third time on October 28, 2004, to Anya Schiffrin, who works at the School of International and Public Affairs at Columbia University.^{[citation needed]}

Publications[link]

Books

• 2010, Freefall: America, Free Markets, and the Sinking of the World Economy, Stiglitz, J.E., W.W. Norton & Company.
• 2010, Mismeasuring Our Lives: Why GDP Doesn't Add Up, Fitoussi, J-P., Sen, A. & Stiglitz, J.E., The New Press.
• 2010, The Stiglitz Report: Reforming the International Monetary and Financial Systems in the Wake of the Global Crisis, Stiglitz, J.E., The New Press.
• 2010, Time for a Visible Hand: Lessons from the 2008 World Financial Crisis, Jones, S.G., Ocampo, J.A. & Stiglitz, J.E. (Ed.), Oxford University Press.
• 2008, The Three Trillion Dollar War, Bilmes, L. Stiglitz, J.E., W.W. Norton & Company.
• 2006, Making Globalization Work, Stiglitz, J.E., Penguin Books.
• 2006, Stability with Growth: Macroeconomics, Liberalization, and Development, Ffrench-Davis, R., Nayyar, D., Ocampo, J.A., Spiegel, S. & Stiglitz, J.E., Oxford University Press.
• 2005, Fair Trade for All: How Trade Can Promote Development, Charlton, A.H.G. & Stiglitz, J.E., Oxford University Press.
• 2004, The Development Round of Trade Negotiations in the Aftermath of Cancún, Charlton, A.H.G. & Stiglitz, J.E., Commonwealth Secretariat.
• 2003, The Roaring Nineties, Stiglitz, J.E, W.W. Norton & Company.
• 2003, Towards a New Paradigm in Monetary Economics, Greenwald, B. & Stiglitz, J.E., Cambridge University Press.
• 2002, Economics, Stiglitz, J.E. & Walsh, C.E., W.W. Norton & Company.
• 2002, Globalization and Its Discontents, Stiglitz, J.E., W.W. Norton & Company.
• 2002, Peasants Versus City-Dwellers: Taxation and the Burden of Economic Development, Sah, R.K. & Stiglitz, J.E., Oxford University Press.
• 2002, Principles of Macroeconomics, Stiglitz, J.E. & Walsh, C.E., W.W. Norton & Company.
• 2002, The Rebel Within: Joseph Stiglitz and the World Bank, The Rebel Within: Joseph Stiglitz and the World Bank, Stiglitz, J.E., Anthem Press.
• 2001, Rethinking the East Asian Miracle, Stiglitz, J.E. & Yusuf, S. (Ed.), Oxford University Press.
• 2000, Frontiers of Development Economics: The Future in Perspective, Meier, G.M. & Stiglitz, J.E. (Ed.), World Bank.
• 1996, Whither Socialism?, Stiglitz, J.E., MIT Press.
• 1989, The Economic Role of the State, Stiglitz, J.E., Wiley-Blackwell.
• 1986, Economics of the Public Sector, Stiglitz, J.E., W.W. Norton & Company.
• 1981, Theory of Commodity Price Stabalization, Newberry, D.M.G. & Stiglitz, J.E., Oxford University Press.
• 1969, Readings in the Modern Theory of Economic Growth, Stiglitz, J.E. & Uzawa, H., MIT Press.

Book chapters

• 2009. "Regulation and Failure", in David Moss and John Cisternino (eds.), New Perspectives on Regulation, ch. 1, pp. 11-23. Cambridge: The Tobin Project.
• 2001, New Ideas About Old Age Security: Toward Sustainable Pension Systems in the 21st Century, edited with Robert Holzmann, World Bank, January 2001.

Selected scholarly articles

• 2007, "Prizes, Not Patents" post-autistic economics review, issue no. 42
• 1998, Distinguished lecture on economics in government: The private uses of public interests: Incentives and institutions. Journal of Economic Perspectives, 12, 3–22.
• 1998, Redefining the Role of the State - What should it do? How should it do it? And how should these decisions be made? Paper presented at the Tenth Anniversary of MITI Research Institute, Tokyo, March 1998.
• 1996, The World Bank Research Observer: No 2: August 1996 by Joseph Stiglitz
• 1993, "Post Walrasian and post Marxian economics," Journal of Economic Perspectives, vol. 7, pp. 109–14
• 1993, "Market socialism and neoclassical economics," in Bardhan, P. K. and Roemer, J. E. (eds.), Market Socialism. The Current Debate, New York: Oxford University Press
• 1989, "Principal and agent," in J. Eatwell, M. Milgate and P. Newman (eds.), The New Palgrave. Allocation, Information and Markets. New York: W. W. Norton
• 1987, "The causes and consequences of the dependence of quality on prices", Journal of Economic Literature, vol. 25, pp. 1–48
• 1981 (with A. Weiss), "Credit Rationing in Markets with Imperfect Information", American Economic Review, vol. 71, pp. 393–410
• 1977 (with A.K. Dixit), "Monopolistic Competition and Optimum Product Diversity", American Economic Review, vol. 67, pp. 297–308
• 1976 (with M. Rothschild), "Equilibrium in Competitive Insurance Markets: An Essay on the Economics of Imperfect Information", Quarterly Journal of Economics, vol. 90, pp.  629–650.
• 1974, "Incentives and Risk Sharing in Sharecropping", Review of Economic Studies, Vol. 41, No. 2, 219-255.
• 1974, "Alternative Theories of Wage Determination and Unemployment in LDCs: The Labour Turnover Model", Quarterly Journal of Economics, vol. 81, pp. 194–227
• 1971 (with M. Rothschild), "Increasing Risk: II. Its Economic Consequences", Journal of Economic Theory, Vol. 3, pp. 66–84
• 1970 (with M. Rothschild), "Increasing Risk: I. A Definition", Journal of Economic Theory, Vol. 2, pp. 225–243

Articles in popular press

• 2011, "Of the 1%, by the 1%, for the 1%", Vanity Fair, May 2011
• 2010, "The Non-Existent Hand". London Review of Books 32 (8): 17–18. 22 April 2010. http://www.lrb.co.uk/v32/n08/joseph-stiglitz/the-non-existent-hand. Retrieved 14 February 2011.  Review of Skidelsky, Robert (2009). Keynes: the Return of the Master. Allen Lane. ISBN 978-1-84614-258-1. 
• 2009, "Wall Street’s Toxic Message", Vanity Fair, July 2009
• 2009, "America's socialism for the rich", The Guardian, June 2009
• 2009, "Capitalist Fools", Vanity Fair, January 2009
• 2009, "Report: The $10 Trillion Hangover: Paying the Price for Eight Years of Bush", with Linda Bilmes, Harper's Magazine, 318/1904, January 2009
• 2007, "The Economic Consequences of Mr. Bush", Vanity Fair, December 2007 Issue
• 2007, Where is the World Going To, Mr. Stiglitz? directed by Jacques Sarasin, First Run Features.
• 2002, "Implications of the New Fannie Mae and Freddie Mac Risk-based Capital Standard", for FannieMae Volume I, Issue 2 March 2002

Video and online sources

• 2010, What should Europe do about Greece?, BBC Newsnight February 10, 2010.
• 2010, Freefall: Joseph Stiglitz at the Commonwealth Club
• 2008, The Three Trillion Dollar War a panel discussion with Joseph Stiglitz and Linda Bilmes regarding their new book, `The Three Trillion Dollar War: The True Cost of the Iraq Conflict.` Feb 28, 2008 at Columbia University.
• 2007, Where is the World Going To, Mr. Stiglitz? directed by Jacques Sarasin, First Run Features.
• World Bank Video presentation
• Online access to Stiglitz published papers, at his own website

This list is incomplete; you can help by expanding it.

See also[link]

• List of economists
• List of Jewish Nobel laureates

References[link]

External links[link]

Wikiquote has a collection of quotations related to: Joseph Stiglitz

• josephstiglitz.com
• Joseph E. Stiglitz at Columbia University
  • Joseph Stiglitz committee chair profile at Committee on Global Thought at Columbia University
• Information and the Change in the Paradigm in Economics 2001 lecture at NobelPrize.org
• Profile and Papers at Research Papers in Economics/RePEc
• Publications at the National Bureau of Economic Research
• Joseph Stiglitz at Econlib
• Column archives at Project Syndicate
• Appearances on C-SPAN
• Joseph Stiglitz on Charlie Rose
• Joseph Stiglitz at the Internet Movie Database
• Works by or about Joseph Stiglitz in libraries (WorldCat catalog)
• Joseph Stiglitz collected news and commentary at The New York Times
• Joseph Stiglitz with Matthew Bishop at the 92nd Street Y, January 2010
• Interview at The Commonwealth Club, February 2010
• Free Markets and the World Economy with the Australian Broadcasting Corporation, July 2010
• Of the 1%, by the 1%, for the 1%, Joseph E. Stiglitz, Vanity Fair, May 2011