Looking for a reason as to why Stiglitz proposes such a ridiculous theory of depressions (structural shifts), Christopher Westley finds the wrong one,
We would do well to remember the context in which economic ideas are promulgated today. Remember, Stiglitz is paid well by the government to provide intellectual heft to market-failure arguments that justify an expansion of the government relative to the market. Even his 2001 Nobel Prize, which he shared with George Akerlof and Michael Spence, was for his work in the area of asymmetric information, which is used by many today to justify state regulation of all trade. So it perhaps makes sense that, today, he argues that technological improvements can lead to a decade-long depression at a time when many people are beginning to question the real practicality of unprecedented fiscal and monetary interventions during significant market corrections (both of which happened in the years following 1929 and 2008, respectively).
I am not pretending to know enough about Stiglitz’ research to give a nuanced account of his ideological development, but Westley’s explanation strikes me as ridiculous even when considering the little of Stiglitz that I have actually read. Westley’s argument boils down to: Stiglitz comes up with this crap, because the government pays him to cover up its failures.
Yet, if someone were to look at Stiglitz’ work through a more objective lens, one could easily come up with an alternative explanation for Stiglitz’ reasoning. Yes, Stiglitz’ work usually revolves around theory that tends to justify interventionism — yes, this was the way he used the concept of “assymetrical information” (but, only because Stiglitz believes that people who hold valuable knowledge will withhold this knowledge from the pricing process; so, government needs to step in in order to provide the missing knowledge). But, is it right to argue that Stiglitz’ interests are purely monetary (that is, that he comes to these conclusions because government hires him to) or because he really believes what he writes?
I think that if one were to actually read Stiglitz’ academic literature it would be found that his beliefs are genuine.
I hate to rag on the Mises Institute, but it is this type of shoddy research which hurts its reputation. It is poor research, further marred by the inability to give intellectual opponents any benefit of the doubt. Its writers do this most frequently with Keynes (because, they are unable to imagine that anybody justifiably accepted Keynes’ theory as they were [there had to be an ulterior motive]), but Keynes is not the only victim.
If you skip over the above quoted paragraph, Westley’s article is decent and gives a good case against Stiglitz’ theory of great depressions. That being said, I am not sure who was giving Stiglitz’ depression theory much credence anyways.