Joseph Stiglitz on What Business Schools Teach That's Wrong
I recently interviewed Nobel Prize-winning economist Joseph Stiglitz in his office at Columbia Business School.
In this clip, Stiglitz answers the question, "What is something that is taught in the modern business school that gives a flawed sense of how risk and financial markets work?"
Many readers won't agree with Stiglitz's views, but that's fine! Leave your rebuttals in the comment section below.
Here's what he had to say (transcript follows):
Stiglitz: Too many economists wanted to believe that markets work well. They had an incentive; they had an interest in believing that markets worked well. That isn't particularly true in business schools, that the business of a business school is business, and you want to believe that markets work well. But unfortunately we have a long history of markets not working well. The Great Depression was a reality, it actually occurred.
And in fact, if you look over the history of capitalism, there have been economic downturns repeatedly in the history of capitalism. There have been credit bubbles, there have been bubbles of all kinds of; real estate bubbles. So markets have exhibited irrationalities, excessive volatility and to me, one of the thing that I just find so striking is how in this period, say after 1980, economists could turn their back on 200 years of capitalism, 200 years of capitalism when things didn't work well.
Before there was government, they wanted to blame everything on the government. The fact is that before there was government, there was huge volatility. It wasn't until the government intervened in creating laws like the Glass-Steagall Act, that we stopped having these banking crises. But because we stopped it, we stopped it, we said let's get rid of government and guess what happened? We started having banking crises again.
So I think that they just were too politically motivated, too self-interested, that they wanted to believe that markets worked well. Markets have enormous strengths. They do wonderful things, but markets are not self-regulating.
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