What Professor Stiglitz learned in Washington.

• Author: Higgs, Robert
• Position: Joseph E. Stiglitz, Washington, D.C.

Joseph E. Stiglitz is a major figure in the mainstream economics establishment. Having been a faculty member at Yale, Princeton, and Stanford, a prolific publisher in the leading academic journals, and the recipient of prestigious honors and appointments, Stiglitz moved in the 1990s into elevated positions as a policy adviser. He presently serves as senior vice president and chief economist for the World Bank. Previously, from 1993 to 1997, he served on the President's Council of Economic Advisers (CEA), chairing the council during the latter part of that period.

Recently he discussed his experience at the CEA in the American Economic Association's annual Distinguished Lecture on Economics in Government (see "The Private Uses of Public Interests: Incentives and Institutions," Journal of Economic Perspectives 12 [Spring 1998]: 3-22).

Stiglitz's academic reputation rests largely on his construction and analysis of mathematical models from which he has concluded that "the market fails" in ways previously undreamt of by neoclassical welfare economists. So no one will be surprised to encounter his confession that he went to the CEA not just to learn at first hand about government policy making but "also as an activist" (3). His appreciation of neoclassical welfare economics has led him to believe that "there will always be some intervention by which the government can make everyone better off" (3-4).

Even though Stiglitz professes an awareness of "government failure" as well as "market failure," his prior studies, it seems, had not sufficiently prepared him for what he encountered in the highest policy-making circles of the national government. He recalls:

When I was in the lawyer- and politician-dominated White House environment,

I often felt that I had arrived in another world. It was not just that

another language was spoken. I understood and expected that; every culture

(including that of economists) creates its own language to set itself

apart. It was that often another system of logic, another set of rules of

reasoning, applied. I had expected lower standards of evidence for assertions

than would be accepted in a professional article, but I had not expected that

evidence offered would be, in so many instances, so irrelevant, and that so

many vacuous sentences, sentences whose meaning and import simply

baffled me, would be uttered.... Empirical evidence--at least beyond an

anecdote or two--and theoretical analysis should have been able to...