This paper is an attempt to broaden economic discourse by importing insights into human behavior not just from psychology, but also from sociology and anthropology. Whereas in standard economics the concept of the decision-maker is the rational actor, and in early work in behavioral economics it is the quasi-rational actor influenced by the context of the moment of decision, in some recent work in behavioral economics, the decision-maker could be called the quasi-rational enculturated actor. This actor's preferences, perception, and cognition are subject to two deep social influences: (a) the social contexts to which he has become exposed and, especially, accustomed; and (b) the cultural mental models—including categories, identities, narratives, and worldviews—that he uses to process information. The paper traces how these factors shape behavior through the endogenous determination of preferences and the lenses through which individuals see the world—their perception and interpretation of situations. The paper offers a tentative taxonomy of the social determinants of behavior and describes the results of controlled and natural experiments that only a broader view of these determinants can plausibly explain. The perspective suggests more realistic models of human behavior for explaining outcomes and designing policies.
Focus areas: Economics of information, economics of uncertainty, risk and agriculture, financial markets, growth and capital theory, natural resources, theory of market structure R&D, macroeconomics, monetary economics, international economics, development, distribution of income and wealth, welfare economics, comparative economic systems/organization theory, political economy, theory of taxation/public finance, theory of public expenditures
Joseph E. Stiglitz was born in Gary, Indiana, in 1943. A graduate of Amherst College, he received his PHD from MIT in 1967, became a full professor at Yale in 1970, and in 1979 was awarded the John Bates Clark Award, given biennially by the American Economic Association to the economist under 40 who has made the most significant contribution to the field. He has taught at Princeton, Stanford, MIT and was the Drummond Professor and a fellow of All Souls College, Oxford. He is now University Professor at Columbia University in New York. He is also the Co-Founder and Co-President of the Initiative for Policy Dialogue at Columbia and Chief Economist of the Roosevelt Institute. In 2001, he was awarded the Nobel Prize in Economics for his analyses of markets with asymmetric information, and he was a lead author of the 1995 Report of the Intergovernmental Panel on Climate Change, which shared the 2007 Nobel Peace Prize. In 2011, Time named Stiglitz one of the 100 most influential people in the world.
Stiglitz was a member of the Council of Economic Advisers from 1993–95, during the Clinton administration, and served as CEA chairman from 1995–97. He then became Chief Economist and Senior Vice-President of the World Bank from 1997–2000. In 2008 he was asked by the French President Nicolas Sarkozy to chair the Commission on the Measurement of Economic Performance and Social Progress, which released its final report in September 2009 (published as Mismeasuring Our Lives). He now chairs a High Level Expert Group at the OECD attempting to further advance these ideas. In 2009 he was appointed by the President of the United Nations General Assembly as chair of the Commission of Experts on Reform of the International Financial and Monetary System, which also released its report in September 2009 (published as The Stiglitz Report). Since the 2008 financial crisis, he has played an important role in the creation of the Institute for New Economic Thinking (INET), which seeks to reform the discipline so it is better equipped to find solutions to the great challenges of the 21st century.
Stiglitz serves on numerous boards, including the Acumen Fund and Resources for the Future.
Stiglitz helped create a new branch of economics, "The Economics of Information," exploring the consequences of information asymmetries and pioneering such pivotal concepts as adverse selection and moral hazard, which have now become standard tools not only of theorists, but of policy analysts. He has made major contributions to macroeconomics and monetary theory, development economics and trade theory, public and corporate finance, theories of industrial organization and rural organization, and theories of welfare economics and income and wealth distribution. In the 1980s, he helped revive interest in the economics of R&D.
His work has helped explain the circumstances in which markets do not work well, and how selective government intervention can improve their performance.
Recognized around the world as a leading economic educator, he has written textbooks that have been translated into more than a dozen languages. His book Globalization and Its Discontents (W.W. Norton, 2001) was translated into 35 languages and sold more than one million copies worldwide. His other books include The Roaring Nineties (W.W. Norton, 2003); Towards a New Paradigm in Monetary Economics, with Bruce Greenwald (Cambridge University Press, 2003); Fair Trade for All, with Andrew Charlton (Oxford University Press, 2005); Making Globalization Work (W.W. Norton and Penguin/Allen Lane, 2006); The Three Trillion Dollar War: The True Cost of the Iraq Conflict, with Linda Bilmes of Harvard University (W.W. Norton and Penguin/ Allen Lane, 2008); and Freefall: America, Free Markets, and the Sinking of the World Economy (W.W. Norton and Penguin/Allen Lane, 2010).
His most recent books are The Price of Inequality: How Today's Divided Society Endangers Our Future (W.W. Norton and Penguin/Allen Lane, 2012); Creating a Learning Society: A New Approach to Growth, Development, and Social Progress, with Bruce Greenwald (Columbia University Press, 2014); The Great Divide: Unequal Societies and What We Can Do About Them (W.W. Norton and Penguin/Allen Lane, 2015); Rewriting the Rules of the American Economy: An Agenda for Growth and Shared Prosperity (W.W. Norton, 2015); and The Euro: How a Common Currency Threatens the Future of Europe (W.W. Norton and Penguin/Allen Lane, 2016).