Joseph Eugene Stiglitz (; born February 9, 1943) is an American economist and a professor. He is a recipient of the (2001) and the (1979).

Mar 31, 2004. Pher Pissarides, two anonymous referees, the editor Richard Rogerson, and numerous seminar participants for comments that are incorporated. The standard theory of equilibrium unemployment (Mortensen and Pissarides 1994. Pissarides 2000). Abraham (1987). Observed business-cycle-frequency fluctuations in unemployment and job vacancies in response to. Search and matching model has become the standard theory of equilibrium unemployment. (Dale Mortensen and Chris Pissarides, 1994. Pissarides, 2000). Christopher Pissarides, two anonymous referees, the editor.

He is a former senior vice president and of the and is a former member and chairman of the (US president's). He is known for his support of public finance theory and for his critical view of the management of, of economists (whom he calls '), and of international institutions such as the and the. In 2000, Stiglitz founded the (IPD), a on international development based at Columbia University. Ata Chapters And Subchapters Pdf on this page.

He has been a member of the Columbia faculty since 2001, and received that university's highest academic rank () in 2003. He was the founding chair of the university's Committee on Global Thought. He also chairs the 's. He is a member of the. In 2009, the, appointed Stiglitz as the chairman of the U.N.

Commission on Reforms of the International Monetary and Financial System, where he oversaw suggested proposals and commissioned a report on reforming the international monetary and financial system. He served as chair of the international Commission on the Measurement of Economic Performance and Social Progress, appointed by President Sarkozy of France, which issued its report in 2010, Mismeasuring our Lives: Why GDP doesn't add up, and currently serves as co-chair of its successor, the High Level Expert Group on the Measurement of Economic Performance and Social Progress. From 2011 to 2014, Stiglitz was president of the (IEA).

He presided over the organization of the IEA triennial world congress held near the Dead Sea in Jordan in June 2014. Stiglitz has received more than 40 honorary degrees, including from Cambridge and Harvard, and he has been decorated by several governments including Korea, Colombia, Ecuador, and most recently France, where he was appointed a member of the Legion of Honor, order Officer.

Based on academic citations, Stiglitz is the 4th most influential economist in the world in 2013, and in 2011 he was named by magazine as one of the. Stiglitz's work focuses on income distribution from a perspective, asset risk management, corporate governance, and international trade. He is the author of several books, the latest being The Euro: How a Common Currency Threatens the Future of Europe (2016), The Great Divide: Unequal Societies and What We Can Do About Them (2015), Rewriting the Rules of the American Economy: An Agenda for Growth and Shared Prosperity (2015), and Creating a Learning Society: A New Approach to Growth Development and Social Progress (2014). Stiglitz at a conference in Mexico in 2009 Risk Aversion [ ] After getting his PhD from in 1967, Stiglitz co-authored one of his first papers with for the Journal of Economic Theory in 1970. Stiglitz and Rothschild extrapolated on previous works by prominent economists such as to work on the concept of, which is the behavior in humans to lower the uncertainty presented in the risk situation. Stiglitz and Rothschild’s paper’s primarily focus was on defining “When is a random variable ‘Y’ more variable than another random variable ‘X’.” In this mathematically complex paper, Stiglitz and Rothschild showed four plausible answers to this question, which led them to write the second paper, in which they analyzed the likely economic effects of increasing risk. They examine an individual’s return on savings, portfolio problem, portfolio-savings problem and a firm’s production problem.

These papers allowed Stiglitz to earn the in 1979. Henry George theorem [ ] Stiglitz made early contributions to a theory of public finance stating that an optimal supply of local can be funded entirely through of the generated by those goods (when population distributions are optimal). Stiglitz dubbed this the ' in reference to the radical who famously advocated for.

The explanation behind Stiglitz's finding is that rivalry for public goods takes place geographically, so competition for access to any beneficial public good will increase land values by at least as much as its outlay cost. Furthermore, Stiglitz shows that a is necessary to provide the optimal supply of local public investment. Stiglitz also shows how the theorem could be used to find the optimal size of a city or firm. Information asymmetry [ ] Stiglitz's most famous research was on, a technique used by one economic agent to extract otherwise private information from another. It was for this contribution to the theory of that he shared the Nobel Memorial Prize in Economics in 2001 'for laying the foundations for ' with and. Before the advent of models of imperfect and asymmetric information, the traditional literature had assumed that markets are efficient except for some limited and well defined. 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 ) that 'whenever markets are incomplete and/or information is imperfect (which are true in virtually all economies), even competitive market allocation is not constrained '. 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 are rarely constrained Pareto optima.' : 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. For Stiglitz,, in the sense that free markets lead to efficiency as if guided by unseen forces. According to Stiglitz: 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 an interview in 2007, Stiglitz explained further: 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, are not necessarily, or in general, led as if by an invisible hand, to economic efficiency. The preceding claim is based on Stiglitz 1986 paper, 'Externalities in Economies with Imperfect Information and ', which describes a general methodology to deal with externalities and for calculating in a general equilibrium context.

In the opening remarks for his prize acceptance 'Aula Magna', Stiglitz said: I hope to show that 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. Shapiro-Stiglitz efficiency wage model [ ]. In the 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, 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 could explain. The answer to these puzzles was proposed by and Stiglitz in 1984: 'Unemployment is driven by the information structure of employment'. Two basic observations undergird their analysis: • Unlike other forms of capital, humans can choose their level of effort. • 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. Some key implications of this model are: • 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'. • 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). Download Lagu Beneath Your Beautiful Acoustic on this page. The outcome is never Pareto efficient. • 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) [ ] • There are also positive externalities: each firm increases the asset value of unemployment for all other firms when they hire during recessions.

By creating hypercompetitive labor markets, all firms (the winners when laborers compete) experience an increase in value. However, this effect of increased valuation is very unapparent, because the first problem (the negative externality of sub-optimal hiring) clearly dominates since the 'natural rate of unemployment' is always too high. Practical implications of Stiglitz theorems [ ] While the mathematical validity of Stiglitz et al. Theorems are not in question, their practical implications in and their application in real life have been subject to disagreement and debate. Stiglitz himself has evolved his political-economic discourse over time. 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. 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' (Stiglitz 1994, p. Objections to the wide adoption of positions suggested by Stiglitz's discoveries do not come from economics itself, but mostly from political scientists, especially in the field of. 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. Government [ ] Clinton administration [ ] Stiglitz joined the in 1993, serving first as a member during 1993–1995, and was then appointed Chairman of the 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, 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 was re-elected, he asked Stiglitz to continue to serve as Chairman of the for another term. But he had already been approached by the 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 to the it unveiled failures of the countries that had followed the (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 had put enormous pressure on the to silence his criticisms of the policies which they and the IMF had pursued.

Stiglitz always had a poor relationship with Treasury Secretary. In 2000, Summers successfully petitioned for Stiglitz's removal, supposedly in exchange for World Bank President '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 *** himself'. Stiglitz resigned from the World Bank in January 2000, a month before his term expired. The, 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. 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. In this role, he continued criticism of the IMF, and, by implication, the US Treasury Department. In April 2000, in an article for, 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. [ ] Stanley Fischer, 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.

In a September 19, 2008 radio interview, with and on 's 94.1 FM in, US, Stiglitz implied that President Clinton and his economic advisors would not have backed the (NAFTA) had they been aware of stealth provisions, inserted by lobbyists, that they overlooked. Initiative for Policy Dialogue [ ]. Main article: In July 2000, Stiglitz founded the (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 [ ] At the beginning of 2008, Stiglitz chaired the, also known as the Stiglitz-Sen-Fitoussi Commission, initiated by President Sarkozy of France. The Commission held its first plenary meeting on April 22–23, 2008, in Paris. Its final report was made public on September 14, 2009.

Commission of Experts on Reforms of the International Monetary and Financial System [ ]. Stiglitz at the annual meeting in, 2009 In 2009, Stiglitz chaired the which was convened by the 'to review the workings of the, including major bodies such as the and the, and to suggest steps to be taken by Member States to secure a more and '.

Its final report was released on September 21, 2009. [ ] In 2010, Professor Stiglitz acted as an advisor to the Greek government. He appeared on Bloomberg TV for an interview on the risks of Greece defaulting, in which he stated that he was very confident that Greece would not default. He went on to say that Greece was under 'speculative attack' and though it had 'short-term liquidity problems. And would benefit from Solidarity Bonds', the country was 'on track to meet its obligations'. [ ] The next day, during a BBC interview, Stiglitz stated that 'there's no problem of Greece or Spain meeting their interest payments'.

He argued nonetheless, that it would be desirable and needed for all of Europe to make a clear statement of belief in social solidarity and that they 'stand behind Greece'. Confronted with the statement: 'Greece's difficulty is that the magnitude of debt is far greater than the capacity of the economy to service', Stiglitz replied, 'That's rather absurd'. [ ] In 2012, Stiglitz described the European austerity plans as a 'suicide-pact'.

Scotland [ ] Since March 2012, Stiglitz has been a member of the 's Fiscal Commission Working Group, which oversees the work to establish a fiscal and macro economic framework for an on behalf of the Scottish. Together with Professors, Sir and Stiglitz will 'advise on the establishment of a credible Fiscal Commission which entrenches financial responsibility and ensures market confidence'. The Labour Party [ ] In July 2015, Stiglitz endorsed 's in the. He said: 'I am not surprised at all that there is a demand for a strong anti-austerity movement around increased concern about inequality. The promises of in the UK and of the Clintonites in the US have been a disappointment.' On September 27, 2015, it was announced that he had been appointed to the, convened by and reporting to, although he reportedly failed to attend the first meeting.

Economic views [ ] Support for anti-austerity movement in Spain [ ] On July 25, 2011, Stiglitz participated in the 'I Foro Social del 15M' organized in (Spain) expressing his support for the. 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 [ ] Stiglitz has been critical of, 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.' Stiglitz co-authored a paper with in 2002 titled 'Implications of the New Fannie Mae and Freddie Mac Risk-Based Capital Standard' where they stated 'on the basis of historical experience, the risk to the government from a potential default on GSE debt is effectively zero.'

However, 'the risk-based capital standard. May fail to reflect the probability of another Great Depression-like scenario.'

Criticism of Trans-Pacific Partnership and Transatlantic Trade and Investment Partnership [ ]. See also:, and Stiglitz warned that the (TPP) presented 'grave risks' and it 'serves the interests of the wealthiest.' Stiglitz also opposed the (TTIP) trade deal between the (EU) and the, and has argued that the should consider in if TTIP passes, saying that 'the imposed by TTIP would be sufficiently averse to the functioning of government that it would make me think over again about whether membership of the EU was a good idea'. Regulation [ ] Stiglitz argues that relying solely on business self-interest as the means of achieving the well-being of society and is misleading, and that instead 'What is needed is stronger norms, clearer understandings of what is acceptable – and what is not – and stronger laws and regulations to ensure that those that do not behave in ways that are consistent with these norms are held accountable'.

Land value tax (Georgism) [ ] Stiglitz argues that would improve the efficiency and equity of agricultural economies. Stiglitz believes that societies should rely on a generalized to finance public goods, protect natural resources, improve land use, and reduce the burden of rents and taxes on the poor while increasing productive capital formation. Stiglitz advocates taxing 'natural resource rents at as close to 100 percent as possible' and that a corollary of this principle is that polluters should be taxed for 'activities that generate negative externalities.' Stiglitz therefore asserts that land value taxation is even better than its famous advocate thought. Views on the eurozone [ ] In a September 2016 interview Stiglitz stated that 'the cost of keeping the Eurozone together probably exceeds the cost of breaking it up.'

Views on Free Trade [ ] In the 1990s, he wrote that 'rich countries in North America and Europe should eliminate all tariffs and quotas (protectionist measures) on goods from developing countries. Advice for European countries [ ] Now, he advises European countries to control their trade balance with Germany by means of export/ or 'trade chits' (a protectionist measure). In recalling Keynesian theory, he explains that trade deficits are harmful: pointed out that countries with surpluses exert a 'negative externality' on their trading partners and lead to weak global aggregate demand. Stiglitz writes: ' Germany's surplus means that the rest of Europe is in deficit. And the fact that these countries import more than they export contributes to the weakness of their economies'.

Thus, he thinks that surplus countries are getting richer at the expense of deficit countries and doesn't believe in the principle of (the basis of free trade), which states that the trade deficit is not important because trade is mutually beneficial. Furthermore, he criticizes the euro, which is said to have caused this deficit: 'The euro system means that Germany's exchange rate cannot increase compared to other euro area members. If the exchange rate were to rise, Germany would have more difficulty exporting and its economic model, based on strong exports, would cease. At the same time, the rest of Europe would export more, GDP would rise and unemployment would fall.' Advice for United States [ ] He denounces the United States' attempts to protect or recreate the well-paying manufacturing jobs through protectionist measures. He advises the United States to pursue globalization or free trade (based on the theory of comparative advantage) and not to tackle against through tariffs. He writes that 'history cannot be reversed' and 'protectionism will not help the economy as a whole'.

'Jobs will be destroyed faster than they are created: there may even be fewer net manufacturing jobs.' He writes that the American middle class is indeed the loser of globalization and China the winner. He considers China's domestic demand is sufficient to have a strong growth and foreign trade is no longer necessary.However, he defends China's trade surpluses at the expense of the United States and believes that China will ' respond with strength and intelligence', and hit the United States,' where it hurts economically and politically' if they try to protect their industry. Books [ ] 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. The Euro: How a Common Currency Threatens the Future of Europe (2016) [ ] The Great Divide: Unequal Societies and What We Can Do About Them (2015) [ ] From the jacket: In The Great Divide, Joseph E. Stiglitz expands on the diagnosis he offered in his best-selling book The Price of Inequality and suggests ways to counter America's growing problem. Stiglitz argues that inequality is a choice – the cumulative result of unjust policies and misguided priorities.

Creating a Learning Society: A New Approach to Growth, Development, and Social Progress (2014) [ ] Creating a Learning Society, (co authored with Bruce C. Greenwald), cast light on the significance of this insight for economic theory and policy. Taking as a starting point Kenneth J. Arrow's 1962 paper 'Learning by Doing,' they explain why the production of knowledge differs from that of other goods and why market economies alone typically do not produce and transmit knowledge efficiently. Closing knowledge gaps and helping laggards learn are central to growth and development. But creating a learning society is equally crucial if we are to sustain improved living standards in advanced countries.

The Price of Inequality (2012) [ ] From the jacket: As those at the top continue to enjoy the best health care, education, and benefits of wealth, they often fail to realize that, as Joseph E. Stiglitz highlights, 'their fate is bound up with how the other 99 percent live. It does not have to be this way. In Stiglitz lays out a comprehensive agenda to create a more dynamic economy and fairer and more equal society' The book received the 2013 Book Award, given annually to the book that 'most faithfully and forcefully reflects Robert Kennedy's purposes – his concern for the poor and the powerless, his struggle for honest and even-handed justice, his conviction that a decent society must assure all young people a fair chance, and his faith that a free democracy can act to remedy disparities of power and opportunity.' Freefall (2010) [ ].

• 197 Downloads • Abstract We describe the functioning of a two-region economy characterized by asymmetric wage setting. Labour market tightness in the leading-region affects wages in the whole economy. In equilibrium, net labour demand shifts towards the leading region raise unemployment elsewhere and leave regional wages unchanged, causing an increase in aggregate unemployment. Based on SHIW micro-data on earnings, we find strong evidence that wages in Italy only respond to Northern unemployment. We estimate that around 33% of the increase in Italian unemployment during 1977–1998 can be explained by regional mismatch, mainly due to an excess labour supply growth in the South.