Saturday, June 15, 2013

Review of Stiglitz's "The Price of Inequality"

In the Political Economic Thought class I taught this past semester, we read books from authors across the political spectrum.  One book we read and discussed was Stiglitz's "The Price of Inequality".  I chose this in large part as Stiglitz makes several arguments that are commonly made by left-wing economists.  Further, Stiglitz has won a Nobel prize, which gives him credibility (albeit for research entirely different than what he discusses here).

Stiglitz makes many points with which I disagree, however.  My short list:

* He discusses the large returns on R&D spending and implies all other government spending is as efficient.
* He disregards any possibility that the government programs create disincentives
* He seems to imply that those with high incomes generally don't deserve them while those at the lower end of the wage spectrum are there largely because of bad luck.  I think the evidence points to the fact that hard work in both education and the workforce plays a significant roll in both the high incomes generated by some and the low incomes generated by others.
* He completely ignores the negative effects of minimum wages.
* He does too much hand waving when economic theory clearly doesn't support his arguments (e.g., on discrimination)
* He worries too much about the the tiny fraction of the US population that is wealthy.
* He ignores the terrible government failures of the US government in the Great Depression and in other time periods.
* And more.

What this book lacks in strong arguments, however, it makes up for with his bashing the motives of those who oppose him.  

Example: On page 259, he refers to his opponents as seeking "a new religion consistent with their faith in minimal interventions in the markets."  Seriously?  The views of market reform are now a religion? Unfortunately, he has this type of attitude throughout the book.

Stiglitz seems to to what people do when they can't argue well enough on the intellectual arguments alone...  rely on name calling and demonizing the motives of their opponents.

I recommend this book for those who want to hear the case from a liberal on what the problems are with the economy and how to fix it.  I disagree with many of his conclusions and am saddened by the tone taken by this Nobel prize winner, but I still think this book can be worthwhile, as long as you also complement it by reading a book (or two) by Friedman, Sowell, Conard, etc.

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