Epstein’s Devastating Critique of Stiglitz
I had seen people passing this around, but it wasn’t until a couple of days ago that I carefully read Gene Epstein’s critique of Stiglitz. Yikes! There is some serious stuff in here. An excerpt:
Even more damning to Stiglitz’s “crisologist” credentials was another paper he failed to mention in Freefall: a March 2002 study, coauthored with Jonathan and Peter Orszag, on the government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac, and commissioned by Fannie Mae. Six years later, of course, the government bailed out these GSEs because of massive defaults on the mortgages that they held. Yet according to Stiglitz and his coauthors, the “probability of default by the GSEs” was “extremely small,” and “the risk to the government from a potential default on GSE debt” was “effectively zero.” Washington’s GSE bailout has been estimated at about $200 billion.
This research certainly bears on Stiglitz’s argument in Freefall that regulators should be trusted to prevent financial meltdowns. Yet the paper isn’t even cited on Stiglitz’s website, among hundreds of others listed. The staff at Fannie Mae must have agreed that the study was worth burying, since they removed it from their website, too.
Very interesting.
I found this from 2009
https://www.econlib.org/archives/2009/11/stiglitz_and_or.html
Thanks.
I think this is the original paper:
https://www.scribd.com/document/22516319/Volume-I-Issue-2-March-2002
Like, what can possibly go wrong when government is being run by altruistic academicians, bureaucrats, and technocrats?
Even with yours and Tom’s podcast, one can forget how much Keynsians (and others) really believe what they say and how nations can be destroyed by following the expert’s advice.
In 1977, Hayek explained to Bill Buckley that Keynes’ “General Theory” was an ad hoc policy designed to reduce wage rates that were artificially too high as the result of prior government intervention regarding the value of the British pound and non-market privileges granted to labor unions. It’s a hoax. That should be the introductory statement every time the subject is brought up.
https://bobroddis.blogspot.com/2014/02/being-polite-to-keynesians.html
Still too much deference on Epstein’s part. Call a spade a spade: Stiglitz is an IYI (intellectual yet idiot) no-skin- in the game bureaucrat.
Stiglitz: I’ll make you better, but meanwhile, I’ll remain a meaninglessly credentialed. sissified, repulsive, shit-stained underwear, woman-repelling troglodyte. But, hey, I know what’s best for the world.
High profile academics like Stiglitz do have significant skin in the game, because they depend on their reputation for everything they do. Without a reputation Stiglitz can’t make money, won’t get invited to speak, won’t be a big wheel at parties…
That’s why Gene is doing a good job preventing Stiglitz from retrospectively hiding his mistakes, especially very pivotal assessments like Fannie & Freddie. A quick search reveals that the paper can be read online (and might be worth taking a few screen shots in case scrubbing is happening).
https://www.academia.edu/4427721/Implications_of_the_New_Fannie_Mae_and_Freddie_Mac_Risk-based_Capital_Standard