Dani Rodrik has a post on the differences between himself and Joe Stiglitz on development. With appropriate genuflection to the vastly greater knowledge and intelligence of both men, I agree with him and disagree with JS on all four points – which are over the fold.
To caricature, I’d say JS has a traditional left view with a touch of vulgar Keynesianism thrown in, whereas Rodrik is sceptical, piecemeal and pragmatic. Radical centre perhaps.
Brad DeLong reports that a student of his wants to know the difference, if any, between Joe Stiglitz’s views on development and mine. Frankly, I had not thought about this quite in this way before, so the question set me thinking. I know that I have shaken my head many times at things that Joe has said or written, so I know there are differences. But what are they?
Leaving issues of rhetoric aside (which I am afraid are often important), here are a few points for future students who want to see the product differentiation a bit more clearly.
1. Joe sees the world economic system as grossly unfair to poor nations, and this unfairness as a severe constraint on their development. This has never been a big part of my own thinking, partly because I don’t see things in quite the same black-and-white terms, and also more importantly because I do not believe the constraints lie in the external rules. I see the main constraints as being internal–domestic politics and policies. Consequently, our take on issues like Doha is quite different. Joe sees a one-sided set of commitments on the part of rich countries to open up their markets in agriculture and other goods as being very important. I see very little benefits from Doha for the poor countries under the best of scenarios.
2. Joe sees international organizations (in particularly the IMF) as being the driver of policy in many developing countries, with uniformly negative consequences. I think that to the extent that this is true, it is more because poor-country leaders choose to rely on their advice excessively than it is because these institutions have the power and ability to impose their will on the world. Much of the bad economic policy in these countries has been self-imposed, and I don’t think the fault should be placed at the doorstep of multilateral institutions. The truth is that developing country leaders have too often abdicated their own responsibilities.
3. On the substance of development policy, I think Joe’s approach is holistic and comprehensive, whereas mine is selective and sequential. As far as I am aware he has not articulated a vision of how developing nations should choose among competing priorities, whereas a lot of my recent work focuses on that specifically. He thinks of growth, development, and social policies as all one thing–whereas I think of them as distinct in terms of policy needs.
4. On macroeconomic policy, Joe has an instinctively dove-ish position on inflation, believing that central banks can always loosen up at the margin with little cost to overall macro stability. I think many circumstances demand a more hawkish position on monetary policy and inflation-especially when fiscal policy is not cooperative.
There. That should be enough to fill up an essay question.
Stiglitz is usually listed among the pioneers of ‘New Keynesian’ economics, which was supposed to deplace what they regarded as vulgar Keynesianism, so he’d be pretty surprised at this characterisation of himself.
What do you mean by it?
James, I was referring to item 4 on Rodrik’s list.
My reference for Stiglitz’s views on inflation is his 1997 Journal of Econnomic Perspectives artyicle, which is a spirited defense of the NAIRU hypothesis. If that’s vulgar Keynesianism then your version must be awfully sophisticated. Rodrik is right that Stiglitz is not an inflation alarmist. He argued in that piece — cautiously and on the basis of a pretty thorough review of the empirical studies to hand — that the existence of an inflation slippery slope was overstated, and that the Fed could afford to experiment more boldly with the unemployment rate. This turned out to be right.
It’s possible that Rodrik is referring to differences with Stiglitz in the developing country context, but again, if there’s some problem with Stiglitz’s analysis I doubt that it arises from being a ‘vulgar Keynesian’.
Yes, all fair enough James.
And perhaps my use of the word ‘vulgar’ was sloppy. Then again one can use words motivated to avoid one kind of misunderstanding, only to invite another kind. I think that’s what happened here. My motives for adding the word ‘vulgar’ were that I didn’t want to associate the word ‘Keynesian’ with the idea of being relaxed about inflation. It’s widely taken to be the case, but I don’t think it’s a true reflection of sensible Keynesianism. It’s certainly not true of Keynes.
Of course that too is a matter of degree. Keynes was keen on stable prices, but as on all matters, (like free trade for instance) didn’t think it was the only game in town.
I’m with Joe.
It seems from the outline of Dani’s commentary that it is based on the more polemical of Joe’s outputs (like Globalization and its Discontents) than the journal articles, which are more rigorous. Even so, I find the commentary somewhat naive.
objection 1 – poor countries’ domestic politics and policies are the main constraint, not the actions of the rich – ignores trade barriers and barriers to movement of people, and especially, the legacy of colonialism which has left many countries with dysfunctional political systems. Also ignores the problem that in many countries the population did not choose and would never choose their leadership: you can’t easily get rid of a corrupt dictatorship (many western countries went through a time when a populace actually could revolt meaningfully – US and Fr. revolutions, europe in 1848 etc. – it is a lot harder in the face of modern automatic weapons).
Similar problems with objection 2 – IMF and WB influence on leaders being their own choice – ignores the power of the threat of reduced loans or aid, especially where these have been propping up the selfsame leaders. Of course, much bad economic policy in poor countries is self imposed – however on my reading I think Joe recognises this.
objection 3 does have some validity, Joe has not done as much work on selectivity and adaption of interventions or policies; but you can’t do everything. re. 4, James has covered it excellently.
Stephen,
You seem to agree with Dani – but add comments about who is to ‘blame’ in some sense.
maybe I’m biased because I’ve met Joe but not Dani. but as I read Dani’s comments, he was saying under point 2 that poor countries in essence have a choice about IMF advice and they “choose to rely on their advice excessively”. Whereas Joe’s position is that often they don’t have such a choice – and this seems to more accurately describe reality. I’d tend to characterise the situation as that the leaders in these countries (for either good or bad motives) perceive that they have no such choice. I’d add WB to IMF under the heading of multilateral institutions, Joe is a bit too kind to his former employers in this regard.