September 3, 2006
Joseph Stiglitz on Globalization
I participated in a conference with Joseph Stiglitz several years ago on the causes of the 2001 high-tech crash. I am a great admirer of the work that won him the Nobel prize, the effect of asymmetric information in bargaining, work that looked carefully at bargaining details in context. At the conference he ripped corporate executives, no surprise there, but then decided that we need to lift the business judgment rule for executives. Executives would be liable for ordinary negligence in court (as opposed to gross negligence). Whoa... In private conversation I asked him whether he wanted judges to run United States corporations. He said, "of course, not"... I asked him to think of how his recommendation would play out in practice. Lost on him. After the conference I read his two new books; both are full of this kind of logic -- see a big problem; propose feel-good, grand scale institutional solutions that demand wealth redistribution; ignore the practical details in how we create or maintain the solutions. His demand, for example, that the United States cede sovereignty to an international tribunal to enforce his new global rules overlooks the minor detail of how to select the judges.
Pity. His Nobel prize winning work was the reverse -- look at the details of bargaining and minutely assess the effects of changing the informational context.
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