Now for what's wrong with Stiglitz's article...

Joseph Stiglitz: "A Banking System is Supposed to Serve Society, Not the Other Way Around":

In my previous post I praised the insight in this article on the underlying cause of the Great Depression, that due to advances in agriculture we had far too many people on the farm, and needed to move a lot of them to manufacturing. And that, analogously, we now have too many people in manufacturing, and need to move them to services. I think there's a lot of truth in that.

However the author's prescriptions, his fixes, are beyond stupid. So I'm going to indulge myself in a bit of fisking.

...The private sector by itself won't, and can't, undertake structural transformation of the magnitude needed—even if the Fed were to keep interest rates at zero for years to come. [We don't know that, because the private sector is tied down, like Gulliver, by a thousand threads of regulation and uncertainty.] The only way it will happen is through a government stimulus designed not to preserve the old economy but to focus instead on creating a new one. [This is insane dreaming, because government is currently obsessed with preserving the old economy. And it is unlikely that any government, Rep or Dem, could be visionary enough to not put its efforts into the known and familiar.] We have to transition out of manufacturing and into services that people want—into productive activities that increase living standards, not those that increase risk and inequality. [That's so vague as to be platitudinous.] To that end, there are many high-return investments we can make. Education is a crucial one [The current world of education is utterly poisoned with statist and reactionary thinking. Pouring more money into it will make things much worse.]—a highly educated population is a fundamental driver of economic growth. [This guy should be reading Goldman's book, How Civilizations Die.. In most parts of the globe increasing education has been accompanied by catastrophic declines in birthrates. (Not catastrophic in America, so far, but bad.) We are educating people to nihilism. Civilizational suicide.]

Support is needed for basic research. Government investment in earlier decades—for instance, to develop the Internet and biotechnology—helped fuel economic growth. [No, government did NOT develop the Internet. (See my post here.) Most government-directed research is ineffective.] Without investment in basic research, what will fuel the next spurt of innovation? [Hey, wait a minute? I thought this was about moving people from manufacturing to services? But this is just the usual Big-Government-Liberal laundry-list.] Meanwhile, the states could certainly use federal help in closing budget shortfalls. [Clueless. Governments aren't suffering "budget shortfalls." They have gone INSANE. All the Blue states and cities have made promises they can't possibly keep, even if the entire Federal treasury is handed over to them. They are bankrupt. They must die in their present form.] Long-term economic growth at our current rates of resource consumption is impossible, so funding research, skilled technicians, and initiatives for cleaner and more efficient energy production will not only help us out of the recession but also build a robust economy for decades. [Green bullshit. All untrue. And the smart money has already realized it!] Finally, our decaying infrastructure, from roads and railroads to levees and power plants, is a prime target for profitable investment....

There's more, but you get the idea. This is so pathetic, because the Mr Stiglitz has had one sterling insight, and yet is unable to imagine (or maybe endure) the possibility that a lot of other things he's been taught are wrong. He is utterly stuck in Industrial Age thinking, and is seemingly unaware that we are in the Information Age. Where things work very differently. He is trapped in the thinking of the Blue Model.

There is another underlying cause of our present problems. That is, that while the private sector has been brutally wrenched into the Information Age, government and quasi-governmental institutions are still working on an Industrial Age paradigm. They have become disconnected with reality, and that's another way of saying, crazy. All around us we see governments and schools and hospitals and NGO's that are dysfunctional. That are bloated and sclerotic. That are stuck in the ideas of the past.

I guess universities are part of the "service sector," but we should be moving people OUT of them, because they have become horrible drags on our world. The UC system and the Calif State University System now have more administrators than faculty. That's not just bad management, it is insane! And I doubt that even Stiglitz is arguing that they are producing graduates ready to do great things for our economy.

Poor Mr Stiglitz can only offer us the usual tired lefty list of desiderata. How will building bridges move people into the service sector? Huh? Levees? Or pouring money into bankrupt local governments? (Well, we've been doing that. With no results.) Stiglitz considers WWII to have been a "Keynsian stimulus." That just renders the concept meaningless. And he has no clue as to what a new "WWII" might be. Nor can he tell us what IS the "basic research" that might help here. He has nothing to offer. He should be reading Random Jottings!

Actually, things in the Information Age morph and change so rapidly that the whole concept of experts deciding what must be done has become an absurdity. In a mere decade or so Blockbuster invented a new way of distributing video, and then was blitzed when Netflix came up with a better way, and now Netflix is floundering in the new world of direct downloads and YouTube. SO, imagine that government had wanted to "stimulate" video distribution! Imagine bureaucrats intervening, or writing regulations to improve all this! Ugh! We'd just now be asking for comments on drafting protocols to prepare to subsidize basic research in VHS tape technology.

Clue-bat to Mr S. We need to be moving towards systems that are self-regulating. I can give some hints if anyone is interested.