Friday, October 06, 2006

Is This What You Reward With a Nobel Price?

On monday, we will know who will receive the nobel price in Economics. Unfortunately I don't think any of the more worthy candidates (aside from me of course, that would mean George Reisman or Mark Skousen or Israel Kirzner) will win. Instead, someone with less sensible theories is likely to win. Just look at this stupid article from one of the previous winners, Joseph Stiglitz.

Stiglitz proposes to fix global imbalances by cutting government spending in America. That would reduce the budget deficit and therefore by extension the current account deficit. So far, so good, but he then proposes a tax reform where you raise taxes for people with high income and lowers them for people with low income. This he says must be done to reduce the impact on the economy from the spending cut by redistributing from the rich to low income earners as the latter have a higher propensity to spend. But the thing is that if it is really true that they have a higher propensity to spend, then this will mean that the effects of the spending cuts on the current account deficit will also be offset, making the whole scheme useless, as Greg Mankiw have also noted.

If a man with such confused thinking is rewarded with the Nobel price in economics, then I am afraid we won't get a particularly worthy recipient this year either.


Anonymous Anonymous said...

It's relieving that you didn't study philosophy since you make a logical fallancy in your argument against Stiglitz.

What Stiglitz writes today has nothing to do with his analyses of markets with asymmetric information for which he earned the Nobel prize.

4:44 AM  

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