What Stiglitz Misses On Inequality: The Responsibility Of Economists

[ Piketty ]

By Steve Denning – There is one category of actor curiously missing from Stiglitz’s list of villains: his fellow economists. There is no mention for instance that it was the winner of the Nobel Prize for Economics, Milton Friedman, whose New York Times article on September 13, 1970, “The Social Responsibility of Business is to Increase its Profits”, launched the idea that corporations should focus solely on making money for themselves and the shareholders, and basically, to hell with everyone else.

Nor is there any mention of the famous 1976 article by Professors Meckling and Jensen, “The Theory of the Firm,”—one of the most cited economics articles ever—which provided a supposed economic rationale for giving generous stock options to the top management so that they would focus sharply on making money for the company—and themselves. It was the nonsensical psychology and fantasy mathematics of this article that provided the economic rationale for the idea that the purpose of a firm is to maximize shareholder value and led to the very management practices about which Stiglitz so eloquently complains. more> http://tinyurl.com/olrwaj5



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