Stiglitz Nobel Prize

Ted Winslow egwinslow at home.com
Fri Oct 12 13:01:21 PDT 2001


[That should read.]

Mat Forstater wrote:


> I don't understand why they say that unemployment caused by wages above
> market clearing is outside the standard model. I also don't understand
> why they say that models that drop the assumption of perfect information
> are outside the standard model. Haven't they ever heard of imperfect
> competition (or is it called monopolistic competition, I forget)? They
> also call "path-breaking" work that shows that markets may not operate
> efficiently when there is not full information--does that mean they
> think that otherwise markets are efficient?

I don't understand how you can reach the conclusion that any existing institutional arrangements - markets or anything else - are "inefficient" (in the sense that they leave open the possibility of making someone "better off" while making no one else "worse off") from the assumption that all behaviour including the behaviour that created these arrangements is "rational". Imperfect information doesn't change the conclusion that whatever exists is "efficient" since a possibility that no one knows about is not a real possibility.

This is a merely logical point. It's scholastic since as the absurd Panglossian conclusion itself shows (let alone events such as those of Sept. 11) the assumption is obviously mistaken.

I wish I could believe there was a real possibility that in some future time people would wonder how "Nobel" prizes could be awarded for logically incoherent arguments based on obviously false premises in the same way they might wonder how 19 people could come to believe that they could gain immediate entry to "paradise" by a suicidal act of mass murder.

By the way Mat, I don't understand how PKT models based on the premise that behaviour is everywhere and always "sensible" are outside the standard model. Do you?

Ted



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