A striking parenthetical revelation kicks off Joseph Stiglitz' new book "Making Globalization Work." He's summarizing his work on "asymmetric information" -- for which he eventually won a Nobel Prize in economics.
"My research on the economics of information showed that whenever information is imperfect, in particular when there are information asymmetries -- where some individuals know something that others do not (in other words, always) -- the reason that the invisible hand seems invisible is that it is not there. Without appropriate government regulation and intervention, markets do not lead to economic efficiency."
The italics are Stiglitz's. But the word "always" shouldn't just be italicized. It should be carved in a block of granite a mile high and wide. Playing fields, left to themselves, are never level. This is true whether one is talking about energy traders betting on gas price futures or free traders negotiating deals in WTO summit meeting back rooms. Self-interest, combined with aysmmetric information, leads to market distortions that do not serve everyone equally.
The funny thing is that whenever Stiglitz's academic work is summarized in a press account or bio, that parenthetical observation is invariably left out. The reader is left to think it through himself -- wait a minute, this isn't just a treatise suggesting that sometimes, things don't work out the way a pure market fundamentalist would predict, this is actually a universally true theorem about all markets, all the time. So it is very refreshing to see the man himself lay it out there, in black and white.
"Making Globalization Work" is in general a refreshing book, a reader-friendly version of "Fair Trade For All," which was published in January and co-written by Stiglitz with Andrew Charlton. It is at once a damning denunciation of things as they are, and a platform for how we can do better. "Globalization does not have to be bad for the environment, increase inequality, weaken cultural diversity, and advance corporate interests at the expense of the well-being of ordinary citizens," writes Stiglitz. His proposals are ambitious and will be extremely challenging to implement. I'll be looking at them in more detail in the weeks to come. But the first step in the journey is to accept the most basic observation: It's an asymmetric, asymmetric world.