The Rhetoric of Joseph Stiglitz

I recently listened to this excellent debate between Joseph Stiglitz and William Easterly. Hearing Stiglitz speak reminded me of his earlier interview with Russ Roberts on Econtalk. There are some themes to Stiglitz's message that I find troubling or bizarre, so I wanted to point them out. Also, see this criticism of Stiglitz by Gene Epstein, who moderates the Easterly debate.

Rules of the Game

In the Easterly debate, Stiglitz uses the expression "rules of the game".  I remembered him using the same phrase in the Econtalk interview. There's nothing wrong with the term in and of itself, but the way Stiglitz uses it is somewhat disturbing. Here's what he says in the Econtalk interview:

What is inevitable though is that government is going to set the rules of the game. And what disturbs me, is, as a result of our politics, that the rules of the game are being set in ways that indirectly distort our economy and create inequality. Our bankruptcy law is an example. Financial deregulation is an example. So the new economy can go without rules of the game--and you have to have rules of the game--the question is: What are those rules of the game? And how are those rules of the game chosen?

I don't have the transcript for the Easterly debate, but as I recall he makes a similar point there. He makes it seem like the government can just lay down the underlying substrate on which society runs. Or maybe there's a better metaphor here? Perhaps government simply sets the underlying source code and can tweak it if an initial attempt gets something wrong. Or maybe the government lays down the tracks that we all run on, and it can simply re-route the tracks if something doesn't look right.

I find this all very creepy. It's facile of him to make restructuring society sound so easy. The "rules of the game" he talks about, that's what we call "the law". People sometimes break laws. If you want laws to be followed, you have to enforce them.  Rules don't simply sit out in the ether, passively directing our behavior. Rules have to be actively enforced by various sanctions, which ultimately means you must be willing to use violence against people who resist being sanctioned. The law can change, for sure. People who are not pleased with the existing order can lobby for some kind of change. A judicial ruling or an act of the legislature can redefine the rules of the game. But this doesn't mean a new rule simply emerges and compels us to obey as if by magic.

What specifically does it mean to change the rules? Stiglitz describes changing "the rules of the game" to target income inequality (which in my opinion is a made up problem, but it's one of Stiglitz's hobby-horses). He specifically mentions bankruptcy law and financial regulations. Now, I seriously doubt we'd see meaningfully different levels of inequality under a very different bankruptcy or regulatory regime. He's probably hinting at tax policy. As in, change the "rules" so that the government takes more from some people and gives more to others. Maybe that's a defensible policy, but couching it in euphemism seems evasive. Also, and maybe this is just me, but the definite article in "the rules of the game" makes it sound like it's something we all agreed to.

Some stark examples my help me explain my problem with Stiglitz's language. Don't like abortion? Let's change the rules of the game to say you can't get one. Don't like drugs? Change the rules of the game to say you can't manufacture, sell, buy, or consume them. Don't like guns? Simple, change the rules of the game to say you can't own them. Don't like gay marriage or gay sex? Change the rules of the game to say you can't have these things. If I simply said, "Let's change the rules of the game so that these things don't happen anymore!", opponents of these policies could fairly accuse me of glossing over all the horrible things that real-world governments do to people to actually enforce these laws. They could fairly point me to back-alley abortions, responsible gun-owners sentences to multi-decade prison terms for crossing the wrong border, police units that targeted and infiltrated the gay community when homosexuality was illegal, and people or entire neighborhoods destroyed by the war on drugs. By all means, let's have those policy arguments. But let's not gloss over the potential harm by implying we're just tweaking some simple rules. Stiglitz isn't just having us re-word a legal clause here and there. He's talking about the government's power to tax and regulate businesses. That entails fining or imprisoning business owners who don't comply. We should be honest about that, and describe it in clear, honest language. 

Freedom and Abridging Freedom Are Symmetrical? 

Stiglitz comes off very badly in the Easterly debate in a part where he derides freedom. He makes a "Your freedom to swing your fist ends where the other man's nose begins" kind of argument. Specifically, he mentions gun control and says something along the lines of (paraphrasing, not quoting): Your right to own a gun conflicts with my right to not be shot. This is in the context of a debate about whether free markets or government programs are most responsible for alleviating poverty. So clearly he's not picking out some extreme edge case, where one person's unobstructed freedom actually interferes with someone else's freedom. Taken in context, he's making a general case for government intervention in markets.

Easterly picks up on this and, I think appropriately, pushes back. He says something to the effect that we should have broad freedoms to interact in the marketplace. If two people wish to transact, and third party busy-bodies object to the transaction, the third party objection should carry little or no weight. Your desire to shut down my business is not equivalent to my desire and my customers' desire (our mutual desire) to transact. This is a good moral principle, but given the context of the debate I think Easterly was also saying that there are practical considerations. As in, too many arbitrary rules with too low a threshold for rule-setting means less economic growth. If third parties can object to what would otherwise be voluntary transactions, and their objections are considered equivalent to the transacting parties' desire to transact, this stifles innovation. New businesses can't form, because they can't overcome the objections of, for example, existing competitors or nosy paternalists.

There's plenty more to find fault with (like Stiglitz's cluelessness about China and his flubbing of some historical details, which Easterly corrects him on). The Gene Epstein piece linked to at the top does a better job than I could.