The Peripatetic Professor

Joseph Stiglitz, PhD '67, brings mathematical precision--and a lot of frequent-flier miles--to the task of eliminating poverty.

A makeup artist, applying just enough concealer to "cover the wrinkles," works around Joe Stiglitz's cell phone, beard, and spectacles as the Nobel-laureate economist fields another media call. It's Halloween night, and in the greenroom of Lou Dobbs Tonight, Stiglitz is preparing for his fifth broadcast appearance of the day.

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"We've been living off a consumer spending spree financed by a housing bubble that was supported by loose monetary policy and lax regulation," Stiglitz, PhD '67, tells the latest reporter seeking comment. "That particular game is over, and what will shore up aggregate demand now is not clear."

What he tells Lou Dobbs and his viewers is no more comforting. "The Federal Reserve is taking some crappy assets, really bad assets, as collateral for the money that we're giving," he says, referring to the government's $700 billion bailout of the nation's financial industry. "It's very disappointing that we spent so much money and got so little for it."

Stiglitz, 65, who teaches at Columbia University, says he's lost count of the interviews he's given since the economic maelstrom intensified in September: as a pioneering scholar in information economics, an expert on globalization, and an advisor to presidents and parliaments, he's found himself in high demand. In the tightly scheduled weeks leading up to November's U.S. presidential election, he was called on to advise Barack Obama's economic team, testify before Congress, and counsel heads of state in Argentina, France, and Botswana. He wrote articles on the worldwide financial crisis for the New York Times, Time, Vanity Fair, and Harper's. And he promoted the paperback edition of The Three Trillion Dollar War: The True Cost of the Iraq Conflict, which he wrote with Linda Bilmes.

In the face of the latest bleak economic news, Stiglitz has few kind words for the policies of the Bush administration. "The same champions of small government and low taxes who said we could not afford health care for children," he says, "are now shelling out hundreds of billions to bail out corporations." Wall Street investment bankers fare no better: "The financial innovations of the last several years have been largely destructive innovations--created to avoid regulation," he says. "We had people who were wizards at pocketing other people's money designing instruments and gambling schemes that didn't assess risk properly or meet the real needs of Americans. They made themselves vastly wealthy and left taxpayers to pay the bailout bill."

He saw the crisis coming and tried to sound the alarm, but he's not necessarily pleased to be vindicated.

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"It's always better to be right than wrong," says Stiglitz, who for years has ardently criticized deregulation and free-market fundamentalism. "But it's also easier to forecast a problem than it is to solve it."

What happens to markets when buyers and sellers, lenders and creditors, employers and employees, know different things--about, say, the value of an asset or the risks of a loan--and don't share that information? Few bothered to ask before Stiglitz and other theorists began pursuing that line of inquiry in the late 1960s. But the study of information asymmetries, as these imbalances are known, has helped explain phenomena as diverse as sharecropping in Africa and insider trading in New York.