Nobel Laureate Stiglitz: “GDP is not enough”

Former World Bank Chief Economist delivers pre-CHOGM Open Lecture at UWI

“If you’re driving along a mountainside in the fog and you don’t know where the precipice is, you don’t speed up.”

The statement from Professor Joseph E. Stiglitz (Winner of the 2001 Nobel Prize in Economics), uttered about midway through his Distinguished Lecture at The University of the West Indies (UWI) St Augustine Campus, Trinidad and Tobago, contained the seed-thought for his presentation.

Titled “Economic Performance and Social Well-Being”, the Distinguished Lecture, which took place at 7 p.m. on Monday 23rd November, 2009 at the newly completed Daaga Auditorium, attracted a standing-room only audience of over 400, including Mr Ewart Williams, Chairman of the Campus Council and Governor of the Central Bank of Trinidad and Tobago; Mr Gary Hunt, Minister of Sport and Youth Affairs; and Professor Rex Nettleford, UWI Vice Chancellor Emeritus.

Stiglitz, University Professor at Columbia University, Chair of Columbia University’s Committee on Global Thought, and co-founder and Executive Director of the Initiative for Policy Dialogue at Columbia, looked perfectly at ease with the large audience. Beneath his conversational tone was a mind conversant with the issues attendant to the theme of his presentation; he spoke for some ninety minutes with no supporting multimedia presentation, consulting his personal notes only sporadically.

The elements of his core analogy—driving, fog and a precipice—though simple, were apt. Driving was an obvious metaphor for the decision-making responsibilities entrusted to political and business leaders, the precipice a clear reference to the fragility of the global economy, and the fog symbolic of inaccurate perception, misdirected focus and the consequent imperceptibility of impending collapse.

“If you don’t have good stats, it’s like driving blind: you don’t know where you’re going,” explained Stiglitz, former Chief Economist at the World Bank (1997-2000). “If your stats don’t provide an accurate description of what’s going on, you can make some bad decisions.”

In a lecture that spoke at length about the glaring contradiction between good economic performance, as measured by GDP per capita, and the level of well-being and happiness in society at large, Stiglitz reframed accounting as “the systematic measurement and documentation of the things that national leaders determine to be important.” He argued that national leadership had a responsibility to identify the key indices of economic activity, in keeping with the overall concerns of the wider population.

“It’s very important that the stats that we gather reflect what people care about,” said Stiglitz, who 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, now standard tools of the economist.

Stiglitz also played a leading role in the 1995 Report of the Intergovernmental Panel on Climate Change, which shared the 2007 Nobel Peace Prize. One of his main criticisms of the GDP is the fact that it rewards increased production without highlighting some of the associated negative social and environmental consequences, such as unemployment, resource depletion and environmental degradation. Citing the UNDP’s Human Development Index (HDI) as one alternative to the GDP, he pointed out, “If you care about education and health, then the GDP doesn’t accurately measure what you care about.”

The lecture was followed by an open discussion, moderated by Dr. Hamid Ghany, Dean of the Faculty of Social Sciences. Hosted under the patronage of University Pro Vice Chancellor and St. Augustine Campus Principal, Professor Clement K. Sankat, the event was a part of the Distinguished Open Lecture series, initiated by the University to create opportunities for world-renowned scholars to share their work with the campus and national communities. Professor Sankat thanked the Prime Minister of Trinidad and Tobago, the Honourable Patrick Manning, for arranging Professor Stiglitz’ visit to Trinidad and Tobago, and congratulated Professor Patrick Watson, Director of The Sir Arthur Lewis Institute of Social & Economic Studies (SALISES) and Professor Terence Seemungal, Chair of the Open Lectures Committee (OLC) for their roles in organizing the Stiglitz lecture in the lead-up to this weekend’s 2009 Commonwealth Heads of Government Meeting (CHOGM).

“Next year, the St Augustine Campus will be celebrating its golden fiftieth anniversary, and we expect to have many more Distinguished Open Lectures in the next fifty years to come,” said Professor Sankat.

To find out more, please contact Patrick Watson, Director of the Sir Arthur Lewis Institute of Social and Economic Studies (SALISES), at (868) 662-6965 or patrick.watson@sta.uwi.edu, or visit the SALISES website at http://www.sta.uwi.edu/salises.

About Joseph Stiglitz

2001 Nobel Laureate in Economics, Joseph E. Stiglitz received his PhD from MIT in 1967 and became a full Professor at Yale in 1970. He has taught at Princeton, Stanford, MIT and Oxford, and is now University Professor at Columbia and Chair of Columbia’s Committee on Global Thought. In 2001, he was awarded the Nobel Prize in Economics for his analyses of markets with asymmetric information. He served as chair of the Commission on the Measurement of Economic Performance and Social Progress and as chair of the Commission of Experts on Reform of the International Financial and Monetary System. Professor Stiglitz was a member of the Council of Economic Advisers from 1993-95 and Chairman from 1995-97. He was Chief Economist and Senior Vice-President of the World Bank from 1997-2000 and continues to serve on numerous other boards. He has made significant contributions to macroeconomics, monetary theory, development economics, trade theory, public and corporate finance, the theories of industrial and rural organization, welfare economics and of income and wealth distribution. His work has helped explain why markets do not always work well, and how selective government intervention may improve their performance. His textbooks have been translated into more than a dozen languages and his book Globalization and Its Discontents has been translated into 35 languages. He also founded the prestigious Journal of Economic Perspectives. His recent books include The Roaring Nineties, Towards a New Paradigm in Monetary Economics, Fair Trade for All, Making Globalization Work and The Three Trillion Dollar War: The True Cost of the Iraq Conflict.

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