In his new book The Price of Inequality (2012)1, Professor Joseph E. Stiglitz nearly completes his metamorphosis from left-leaning but serious scholar to severe prosecutor ..
The author who, according to the New York Times, holds the "commanding position" in the storm troop of unorthodox economists, has earned his Nobel Prize for his work on asymmetric information in exchanges between a well-informed seller and a poorly informed buyer on terms that are on some definition, inefficient, false and can subjectively be condemned as unjust. In his new book, Professor Stiglitz remains faithful to the asymmetric information that has earned him fame as an observer. He now makes massive use of it, but no longer as an observer. Now he is the seller, bowling the buyer over with an avalanche of arguments supported by eloquent statistics. The statistics are selective and serve the purposes of the selector. If the reader buys the argument, he does so mainly because he is less informed than the author about the existence of masses of alternative statistics that tell a different story but are kept out of the book.
Even if the Stiglitz thesis did not get it wrong too often, it would still be a failure on one fundamental score: it tacitly ignores the rule that you must take the rough with the smooth. Inequality, if he is to be believed, has countless painful consequences that amount to a heavy price. Tacitly and sometimes overtly, he invites the reader to go for remaking it, to smooth out the rough and accept only the smooth with the smooth. This, however, cannot be done. Every alternative social order has built-in consequences, some rough and some smooth, that cannot be sorted out from one another. Equality also has a price like every other system of collective choice rules, and it suffices to think of the late Soviet Union, North Korea, Cuba and many less acute examples to suspect that its price could be a awesome one, even if imposed in less exotic countries. It is always tempting for the would-be social engineer to propose reforms that promise to smooth out the rough and reduce the price of the social order. Before yielding to the temptation, it is well to remember that everything has a price, but the price of everything is very hard to recognize, let alone to predict.