Economists and policy-makers need to rethink the long-term development of the nation's economy rather than design temporary solutions to crises, said the Columbia University economist, reports The Daily Bruin.
By Jessica Savio for The Daily Bruin
Economists and policy-makers need to rethink the long-term development of economics rather than design temporary solutions to crises, Joseph Stiglitz said Thursday at UCLA.
The world-renowned economist, recipient of a Nobel Prize in economics and lead author on a report that shared the 2007 Nobel Peace Prize spoke in Korn Convocation Hall to a room filled with students and faculty.
Stiglitz was selected to deliver the 2011 Arnold C. Harberger Distinguished Lecture, which is organized periodically by the UCLA Burkle Center for International Relations to showcase critical thinkers and independent thought.
As a former leader of the World Bank and an adviser to the Clinton administration, Stiglitz has had an inside perspective but has also remained an independent thinker and critic, said Alexandra Lieben, Burkle Center deputy director.
Stiglitz addressed topics that he discusses in his recent book, “Free-fall: America, Free Markets, and the Sinking of the World Economy,” which focuses on the domestic aspects of the global economic crisis.
Although there are areas of the economy that are doing well, Stiglitz said the economy is clearly not in a robust recovery.
“The statistic that strikes me the most is that one out of six Americans who would like a full-time job can’t get one,” he said.
Edward Leamer, professor in economics and statistics, introduced the lecture with a claim that negative consequences emerged from the economic policies of the past decade, including growing inequality.
“We have unmatched opportunities for the few,” said Leamer, who also directs the UCLA Anderson Forecast. “Entrepreneurs and innovators, but also parasites.”
Lieben said it is important to understand how the country got to this point to prevent it from facing a similar crisis in the future.
Stiglitz identified the three major factors that have contributed to the current deficit: the economic downturn, tax cuts and increased investments in military ventures.
“The best way to attack the deficit is to put America back to work,” he said.
Because of the high rate of unemployment, he said the country is not performing at full potential and is therefore disadvantaged in addressing the deficit problem.
An attendee asked how the nation can get people back to work.
“The basic recipe is restructuring what we spend our money on and how we tax,” Stiglitz answered. “Spending money on wars does not stimulate the economy. Investing money in the unemployed does.”
Stiglitz also addressed the question of who can be blamed for the crisis and the failure to resolve it.
He said there have been fallacies in the the government’s financial regulation practices, but also in the profession of economics.
Specifically, economics failed to predict the extent of the crisis and did not have any advice on how to respond to it, he said.
Stiglitz added that the government’s response to the economic crisis has not worked as well as anyone had hoped.
“There were incentives to believe that we just had a little bump,” he said.
However, he believes there are fundamental political problems that are not being addressed.
“America has always recognized the challenges that it has faced, and it has always responded,” he said. “My hope is that the same can happen in this situation.”