Stiglitz: "It's the Stupid Economy Models" #wbf10

We've been spending the better part of two-and-half years now trying to figure out "what went wrong" in the economy and who is to blame. Was it the banks? No, it was the regulators. Yeah, but no, it was individuals buying more house than they could afford and then sucking out what equity they had. Back to the regulators. Yeah, but it was the predatory lenders. No it was the securitiazations that encouraged them. Back to the regulators. And around and around and around. Now comes 2001 Nobel Prize recipient in economics Joseph Stiglitz to tell us that "the economics profession bears more than a little culpability. It provided the models that gave comfort to regulators that markets could be self-regulated; that they were efficient and self-correcting."

Phew, not that that's settled. We can move on; it wasn't out fault. But seriously, "It is hard for non-economists to understand how peculiar the predominant macroeconomic models were." If in hindsight, he is correct, and if you had been basing your decisions, whether consciously or subconsciously on these models, well, then it was only a matter of time before everything went into the toilet. For Stiglitz, then, "not only is our economy in a shambles but so too is the economic paradigm that predominated in the years before the crisis – or at least it should be." Time and experience will tell if Stiglitz is right, but he expanded on this point of view at the Institute for New Economic Thinking's inaugural conference, and if you have 43 minutes to spare, check it out: 

Stiglitz thinks the future needs some serious rethinking, and he definitely falls into the global coordination camp, which is still a difficult row for U.S.-centric business thinkers to hoe. But global is the way the wind is blowing (the release of the Basel III capital requirements is today's example), so you have to consider Stiglitz's views. That's why we asked him to join WBF10 on October 6 for a broad examination of the promise and pitfalls of globalization and to peer into his crystal ball to discuss a new agenda for a changing economic and financial landscape. More heady stuff, including the global economy in the aftermath; globalization and its multiple dimensions; and how to successfully leverage national competitive advantages, which encompasses his comprehensive agenda to promote development. Regardless of your view on globalized agendas, oyu have to listen.