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I’ve posted already a link to my critical review of Joseph Stiglitz’s 2024 book, The Road to Freedom: Economics and the Good Society. As you can see, I’m not a fan.
My review could have easily hit 5,000 words. There were so many errors and misleading statements that I didn’t get room to critique. It is, as my military students would say, a “target-rich environment.”
In the Preface and the first two chapters alone are these statements:
As the US economy was on the verge of a meltdown in 2008 after decades of financial deregulation (p. xii)
A person facing extremes of want and fear is not free. (xiv)
Over time, democratic political systems had identified areas in which markets were not delivering what societies wanted and needed, like retirement benefits, and countries had figured our ways of doing so publicly. (p. 30)
They [neoliberals] closed their eyes not only to the big failures but to the smaller ones that make life for so many so difficult—airlines with myriad delays and lost luggage, cell phone and internet services that are unreliable and expensive, and in the US, a health-care system that, while the most expensive in the world, is impossible to navigate and results in the lowest life expectancy of any of the advanced countries. (p. 31)
I don’t have room here to give a complete response, but I’ll respond briefly one by one.
As the US economy was on the verge of a meltdown in 2008 after decades of financial deregulation (p. xii)
Was there some financial deregulation over decades prior to 2008? Yes. Think of the ending of Regulation Q, for example, which prevented banks from paying interest on checking accounts. There were a few others. But there was also increased regulation.
So his statement is not false; it’s misleading. And, even though he doesn’t say it, Stiglitz appears to want the reader to think that financial deregulation was a main cause of the 2008 “meltdown.” That’s false. Backing my claim would take more time than I have right now.
A person facing extremes of want and fear is not free. (xiv)
False. If that were true, almost no one in the 17th century was free. Freedom isn’t the same as wealth or ease.
Over time, democratic political systems had identified areas in which markets were not delivering what societies wanted and needed, like retirement benefits, and countries had figured our ways of doing so publicly. (p. 30)
How does Stiglitz know what people wanted? If markets weren’t delivering certain things, there’s a presumption that people didn’t want them very much. That’s not true when there are large externalities or public goods problems. But retirement benefits are private goods. A dollar you save for your retirement is a dollar I can’t have.
Social Security came along in 1935. Why is that significant? Because it was in the middle of a Depression and so it was hardly likely that people’s first instinct was to ask, “How can I save for my retirement?” rather than, “How the heck can I feed my family?” Moreover, given life expectancies at the time, it didn’t make sense for many people to put aside many resources for retirement, even absent the Great Depression. And it was telling that even though the Senate voted for the Clark Amendment to the Social Security bill, an amendment that would have allowed people to avoid Social Security if they had government-approved pension plans, it was not included in the bill. It looks as if the market was trying to provide retirement benefits.
They [neoliberals] closed their eyes not only to the big failures but to the smaller ones that make life for so many so difficult—airlines with myriad delays and lost luggage, cell phone and internet services that are unreliable and expensive, and in the US, a health-care system that, while the most expensive in the world, is impossible to navigate and results in the lowest life expectancy of any of the advanced countries. (p. 31)
This is all Stiglitz can come up with? Notice that he misses the fact that deregulation under President Carter led many middle class and lower-middle class people to be able to afford air travel. Cell phone service, although sometimes unreliable and expensive, exists. That’s due to the free market. And as Thomas Hazlett has pointed out, it would have existed decades earlier if not for the Federal Communications Commission.
And the health care system? It is expensive and full of waste. It’s also one of the most heavily regulated and heavily subsidized industries in the United States. So it’s hardly a way to judge free markets.
I am 70 years old and remember the high prices of "long distance phone calls" and a thing call a "toll call." Communication is cheaper today then in the past.
On a Sunday night in November 1973, I made a long-distance call from my dorm room in Knoxville, Tennessee, to someone in Tallahassee, Florida, during the time of day when long distance rates were cheapest. It cost me the equivalent today of nearly $200. If I made that call today, it would be at a zero marginal cost. But Joseph Stiglitz wants to claim that is a market failure, that somehow telecommunications was superior in a hyper-regulated state than it is now.
Don't forget that before passage of the Staggers Act in 1980, US freight railroads were approaching Third World status. Today, we have the best rail freight system in the world. Maybe Stiglitz wants us to believe that the current situation with rail freight is due to something else than ending the government cartelization of railroad, just as it ended the cartelization of trucking, telecommunications, and passenger air. I guess he could convince Paul Krugman or Brad DeLong that was the case, but it would be dishonesty.
It really is time to call out Stiglitz for what he is: an egotistical (Remember the removal of Clowers from the AER editorship because he rejected a Stiglitz paper?), second-rate economist. I say second-rate because the man cannot even discern the difference between a heavily-regulated industry and one where markets relatively prevail. That is basic stuff, people.
If not a second-rate economist, then I would say he is a dishonest one.