Editing Joseph Stiglitz (section)

=== Market efficiency ===
For Stiglitz, [[Invisible hand#Joseph E. Stiglitz|there is no such thing as an invisible hand]], in the sense that free markets lead to efficiency as if guided by unseen forces.<ref name="NOTTHERE">{{cite news|url=https://www.theguardian.com/comment/story/0,3604,863426,00.html#article_continue|title=There is no invisible hand|last=Stiglitz|first=Joseph|date=December 20, 2002|work=[[The Guardian]] Comment|access-date=October 29, 2013|location=London}}</ref> According to Stiglitz:<ref name="HAND1">{{cite news|url=http://blogs.iht.com/tribtalk/business/globalization/?p=177|title=Q & Answers with Joseph E. Stiglitz|last=Altman|first=Daniel|date=October 11, 2006|work=Managing Globalization (blog) [[International New York Times|The International Herald Tribune]]|archive-url=https://web.archive.org/web/20090626040606/http://blogs.iht.com/tribtalk/business/globalization/?p=177|archive-date=26 June 2009}}</ref>{{blockquote|Whenever there are "[[externality|externalities]]"{{snd}} where the actions of an individual have impacts on others for which they do not pay or for which they are not compensated{{snd}} markets will not work well. But recent research has shown that these externalities are pervasive, whenever there is imperfect information or imperfect risk markets{{snd}} that is always.

The real debate today is about finding the right balance between the market and government. Both are needed. They can each complement each other. This balance will differ from time to time and place to place.}}

In an interview in 2007, Stiglitz explained further:<ref name="PACT">{{cite web|url=http://www.beppegrillo.it/eng/2007/01/stiglitz.html|title=Stiglitz, Joseph E. ''The pact with the devil.'' Beppe Grillo's Friends interview|publisher=Beppegrillo.it|archive-url=https://web.archive.org/web/20150124040716/http://www.beppegrillo.it/eng/2007/01/stiglitz.html|archive-date=January 24, 2015|url-status=dead|access-date=October 29, 2013|df=mdy-all}}</ref>

{{blockquote|The theories that I (and others) helped develop explained why unfettered markets often not only do not lead to social justice, but do not even produce efficient outcomes. Interestingly, there has been no intellectual challenge to the refutation of Adam Smith's invisible hand: individuals and firms, in the pursuit of their [[self-interest]], are not necessarily, or in general, led as if by an invisible hand, to economic efficiency.}}

The preceding claim is based on Stiglitz's 1986 paper, "Externalities in Economies with Imperfect Information and [[Incomplete Markets]]",<ref name="GrSt1986">{{cite journal|last1=Stiglitz|first1=Joseph E.|last2=Greenwald|first2=Bruce C.|date=May 1986|title=Externalities in economies with imperfect information and incomplete markets|journal=[[Quarterly Journal of Economics]]|publisher=[[Oxford University Press]] |volume=101|issue=2|pages=229–64|doi=10.2307/1891114|jstor=1891114|doi-access=free}} [http://www2.gsb.columbia.edu/faculty/jstiglitz/download/papers/1986_Externalities_in_Economies.pdf PDF; 2.96 MB] {{webarchive|url=https://web.archive.org/web/20110513135712/http://www2.gsb.columbia.edu/faculty/jstiglitz/download/papers/1986_Externalities_in_Economies.pdf|date=2011-05-13}}</ref> which describes a general methodology to deal with externalities and for calculating [[Optimal tax|optimal corrective taxes]] in a general equilibrium context. In the opening remarks for his prize acceptance at [[Aula Magna (Stockholm University)|Aula Magna]],<ref name="PRIZELECT">{{cite web|url=http://nobelprize.org/nobel_prizes/economics/laureates/2001/stiglitz-lecture.html|title=Stiglitz, Joseph E. ''Prize Lecture: Information and the Change in the Paradigm in Economics.'' Joseph E. Stiglitz held his Prize Lecture December 8, 2001, at ''Aula Magna,'' Stockholm University. He was presented by Lars E.O. Svensson, Chairman of the Prize Committee|date=December 8, 2001|publisher=Nobelprize.org|access-date=October 29, 2013}}</ref> Stiglitz said:<ref>Stiglitz, ''Aula Magna''</ref>

{{blockquote|I hope to show that [[Information economics|Information Economics]] represents a fundamental change in the prevailing paradigm within economics. Problems of information are central to understanding not only market economics but also political economy, and in the last section of this lecture, I explore some of the implications of information imperfections for political processes.}}