Is Stiglitz more moral than others? Are government interventions really better?

Joseph Stiglitz argues in his book "Globalization and its discontents" that governments under some circumstances (i.e. in the presence of market failure) can improve economic outcome by well-chosen interventions. But how can you be so sure that governments will select “well-chosen” interventions, and who are going to be the judges on what are “well-chosen” and what are not. Theoretically Stiglitz is absolutely right (in that there are market failures), but in practices no one can agree on what are “well-chosen” unless there is an omnipotent angle who can plan our welfare benevelently (but we know that all government officials are human beings!).

In a book review of Stiglitz’s “Globalization and its discontents”, Harvard professor Benjamin M. Friedman very insightfully point out that the main flaws of Stiglitz’s accusation (of pro-market polices)  lie in his selective memory and his ignoring of counterfactuals. Basically, Stiglitz keeps on mentioning several successful cases of economic miracles where government interventions may play a helpful role, while remains outright silent on vast majority of other cases where government interventions created disasters. No one say that market economy is perfect. But as Churchill puts it, democracy is certainly not the best system, but it is at least not the worse. The same logic applies to market economy: when evaluating the outcome of a decision, you ought to assess it in relation to the plausible counterfactual alternatives, i.e. will things get worse or better under an alternative route. Otherwise you may reach a conclusion that all doctors are bad because their patients are all sick. I am sure the patients will not be sick unless they see doctors; they will simply die.

Let me cite some words from Professor Friedman’s book review article, which I like very much:

“A more fundamental problem, as Stiglitz readily acknowledges, is that we cannot reliably know whether the consequences of the IMF's policies were worse than whatever the alternative would have been. Many longtime observers of the developing world will notice that Stiglitz rarely mentions economic policy mistakes that poor countries make on their own initiative. Nor does he pay much attention to the large-scale corruption that is endemic in many developing economies—except in the case of corruption in Russia, where he argues that the privatization program pushed by the IMF opened the way for corruption on a historically unprecedented scale. He also never points out that the typical developing country spends far more on its military forces (to fight whom?) than it receives in foreign aid; yet it would seem necessary to take account of such wasteful expenditures, along with graft in all its forms, if one is to give a clear picture of why the non-developing economies are not succeeding.”

Stiglitz in his book also accuses that IMF officials are insensitive to poor people. He observes that IMF officials tend to meet only with finance ministers and central bank governors, as well as with bankers and investment bankers; they never meet with poor peasants or unemployed workers.

To answer him, let me quote Dr. Gregory House’s famous answer in the TV Series House M.D. , when asked why he never tries to meet and talk with patients (he only make diagnoses based on medical test results. )

He calmly addresses the question: Do you want a doctor who will hold your hands when you are dying, or a doctor who walk away from you when you are recovering?

To solve real problems, good intentions are not sufficient. In many cases, disaster are created by people with good intentions, as well as by hypocritical people who assume they command moral heights. We need someone who exhibit actions in helping poor people, instead of someone who repeats to you day by day how he cares about you and how others do not care about you.

Please also check out my previous commentary on Stiglitz's book review of Friedman's "Moral Consequences of of Economic Growth".

Comments

[FreeStoring]

hay!!
good project :)
senks :)