80th Congregation (2016)
Professor Joseph Eugene STIGLITZ
Many people have a social conscience. Their awareness of the inequalities within their society is often awakened when they are young, maybe by their own parents or by what they perceive outside the home. As they get older they may continue to speculate about the causes or solutions of these inequalities, but they usually don’t try to do anything about them. A smaller number are more activist, through politics or advocacy of some kind, but often lack the intellectual framework. There are very few people who are capable, first, of developing exceptionally powerful and original intellectual theories of inequality; and then, secondly, turning these academic accounts into successful activism on the world stage.
Joseph Stiglitz was born and raised in the steel town of Gary, Indiana, near Chicago. His father was a strong civil rights advocate in later life, while his mother’s family were New Deal Democrats and worshippers of President Roosevelt. Political issues were strongly debated in his home, while poverty, unemployment and social discrimination were facts of life in the wider community, and matters of concern in the public school he attended, where he was himself a top debater, though more interested in the ideas than the sport of debating itself.
He learned much more about the contest of ideas at Amherst, one of America’s best liberal arts colleges. The Socratic teaching style and broad historical perspectives later helped him develop his thinking about globalization. But he also formed two enduring commitments: to economics, especially economic policy and the theory of markets; and to active politics, where through his presidency of the student council he promoted social change at a time when civil rights movements were galvanizing the country.
But it was at the Massachusetts Institute of Technology (MIT) that Joseph Stiglitz became a professional economist. He had four Nobel Laureates as professors, including Paul Samuelson, who was from the same home town as Stiglitz, and is said to have recommended him on one occasion as the best economist from Gary, Indiana. In political economy, MIT was somewhat closer to Cambridge, UK than to Chicago, with a more interventionist approach to policy, and Stiglitz and his fellow students became fascinated by growth theory. In 1965, he spent a year at Cambridge on a Fulbright fellowship where he found himself employing the tools that had been used to describe the dynamics of growth as a way of describing the dynamics of inequality. The standard model of a market economy where a perfectly competitive equilibrium with full employment will always tend to establish itself might seem plausible for those who grow up in affluent suburbs, but someone from Gary knew that such a model does not account for the observed reality of persistent discrimination, nor explain why over time and through several generations unpredictable shocks repeatedly occur, with persistent adverse consequences, including unemployment. The causes and consequences of inequality had always been Stiglitz’s deepest concern, but now he was developing a formidable mechanism through which to articulate that concern.
After a year back at MIT he moved to Yale and began his work on the economics of uncertainty, which in turn led to thinking about the economics of information: especially of imperfect information, in which asymmetry or inequality of information in the structures of a market economy limits and distorts those supposedly rational choices made by firms or individuals, and often leads to monopolistic competition and persistent unemployment.
As these powerful ideas developed through the 70s, 80s and 90s Stiglitz held professorial positions at Yale, Stanford, Oxford and Princeton Universities. In 1979 he had won the John Bates Clark Award given by the American Economic Association to the economist under 40 who has made the most significant contribution to the field. He has been University Professor of Economics at Columbia since 2000. But even such a distinguished academic career could not satisfy the political side of his ambitions. In 1993 he moved to Washington to join the Clinton Administration, eventually becoming Chairman of the Council of Economic Advisers and a member of the cabinet. He also served on the International Panel for Climate Change, a lead author in their work identifying the economic impacts of climate change. In the Clinton Administration, he was involved in every aspect of policy that touched on economics—which is almost every aspect, from drafting new toxic waste legislation to formulating trade and security policies. Most importantly, he played a leading role in developing the new economic philosophy known as the ‘third way’, recognising that governments had an important but limited role to play in correcting the limitations of markets.
Then in 1997 Professor Stiglitz was appointed Chief Economist and Senior Vice President at the World Bank. Here his fascination with the interface between intellectual frameworks and the practical aspects of poverty elimination could finally be played out on a world stage, including in his disagreements with the models, policies and practices of the Bank’s sister institution, the International Monetary Fund, in Africa, during the Asian financial crisis, and as the former centrally-planned economies made the transition to market economies.
After three years at the Bank Professor Stiglitz returned to academia, but that long period of policy and practical experience left him even better equipped to continue his work in changing attitudes towards international development and inequality more widely. His ability to do this was enhanced by the award in 2001, along with A. Michael Spence and George A. Akerlof, of the Nobel Memorial Prize in Economic Sciences, for his analyses of markets with asymmetric information. Professor Stiglitz was already (and has since been) the recipient of many academic awards and prizes, and he is a fellow of many top level learned societies; but the Nobel Prize meant that intellectual recognition at the highest level could now work hand in hand with his top-level practical experience in achieving social change. Under his influence such concepts as adverse selection and moral hazard have become standard tools of policy analysts as well as theorists. He has made major contributions to development economics and trade theory, macroeconomics and monetary theory, industrial and rural organization theory, welfare economics and wealth distribution. In the last 15 years his many prize-winning books written for general audiences have become worldwide best sellers. His 2002 book Globalization and its Discontents has been translated into 35 languages, while The Three Trillion Dollar War from 2008 reshaped debate on the costs of such conflicts as the one in Iraq. Stiglitz is Co-Chair of the Organization for Economic Co-operation and Development (OECD)’s High-Level Expert Group on the Measurement of Economic Performance and Social Progress. And as if one Nobel weren’t enough, the 1995 Report of the Intergovernmental Panel on Climate Change, of which he was a lead author, shared the 2007 Nobel Peace Prize. In 2011 Time magazine named Stiglitz one of the world’s 100 most influential people. There are indeed very few who have combined such a level of intellectual distinction with such a high degree of policy influence.
For his unique and remarkable contributions to economic theory and to social change on a world scale, it gives me great pleasure, Mr Vice-Chancellor, to present to you Professor Joseph Eugene Stiglitz, for the award of the degree of Doctor of Social Science, honoris causa.
This citation is written by Professor Simon Haines