One interesting feature in "the Independent" newspaper is its You Ask the Questions column. Joseph Stiglitz was "grilled" in the latest. For example:
What are the implications of recent economic developments for the teaching of economics?
The idea that markets are "self adjusting," that free, unfettered markets lead as if by an invisible hand to the well being of all, has been repeatedly refuted (the Great Depression was the most telling refutation). But it is a lesson that has to be learnt over and over again.
The challenge is to get the right balance between markets and government, to get the right form of regulation that allows for innovation – but not the kind of financial innovation that we have just seen. Instruments that were supposed to reduce risk actually increased it.
Stiglitz is a Nobel Laureate in Economics. That's worth noting; economics is regarded as being as scientific as chemistry, medicine and physics! (Maths has to make do with the Fields Medal.) Marx called the subject "political economy" - it is far more apt as it shows economists are really peddlers of ideological mumbo-jumbo. As an editorial in "the Economist" from 2nd June 1973 put it (quoted in the SPGB pamphlet on Marxian Economics)
If economists today took more trouble to explain in simple language what they are trying to prove and what relevance it might have, the gulf between theory and practice might be closed somewhat. As it is, more and more economists fill more and more pages of learned journals with an endless stream of ill-written, verbose, half-baked mumbo jumbo which has as much value to policy makers as the chattering of starlings.
Stiglitz's answer is an explicit attack on standard, free-market economics. The market, argue some defenders of capitalism, possesses this "invisible hand", which secures prosperity and democracy for all; the concept dates back to Adam Smith.
Quite what he has in mind on the right balance between market and government is not clear. History has shown Keynesian economics to be just as big a failure.