One theme that has taken hold of modern literature is that of the wise and yet credulous teacher unintentionally giving rise to magnamious destruction and evil at the hands of his students.
Think Obi-Wan / Darth Vader of Star Wars or Dumbledore / Voldemorte of Harry Potter.
Professor Joseph Stiglitz, 2001 Nobel Laureate and globally renowned economist, unfortunately discovered that literature all too often mirrors reality this year as the Obama administration, filled to the brim with former disciples of Stiglitz, has proceeded to back the Fed / Treasury strategy of "deference to the financial sector."
The very policy that Stiglitz has been an outspoken and stalwart critic of.
Still, Stiglitz is critical of the president's plans to rescue the economy and questions his appointment of Summers as his top economic adviser."
Also from Bloomberg:
“The Roaring Nineties” [a book by Stiglitz] argued that the deregulation and market excesses of the 1990s laid the seeds of later crises. It inspired a speech by Obama a year ago, said a top aide from the Obama campaign, who spoke on the condition he wouldn’t be identified. The address laid out the president’s plan to reinstate and modernize regulation of Wall Street to avoid further crises."
So Obama and his financial advisors (Stiglitz-trained) used Stiglitz's words to ramp up anti-Wall Street spirit and win election... And then signed a blank check to the Fed. And will soon hire Larry Summers, a proponent for deregulation and key figure in the design of the 1999 Gramm-Leach-Bliley Act, which repealed longstanding banking regulations.
The same Larry Summers that Stiglitz has openly criticized: "It’s “a real concern” that people such as Summers, “who have been openly on the side of deregulation,” are back in positions of power, said Stiglitz"
For those who are unfamilliar with Stiglitz, broadly speaking he is to "Liberal" politics/economics what Ron Paul is to "Conservative" poltiics/economics. In fact, the more you read/listen to Stiglitz, the more you understand that his theories are not mutually incompatible with Austrian economics.
Indeed, listening to Stiglitz make a speech reminds us that there are still rogue scholars out there who emanate honesty, wisdom, frankness and compassion, much like Ron Paul.
The paper that won him the Nobel prize proved that informational asymmetries in a market set-up will result in a less-than-desirable outcome for society. In other words, in the face of cronyism / insider information / market imperfections / Flash Order Systems / etc, there will be no optimizing free market 'invisible hand.'
Although I have never seen him explicitly recognize Austrian economics, Stiglitz has proferred harsh criticisms of overly lax monetary policy, 'inflation-targeting' Fed policy, and has insisted on letting banks fail and restructure themselves independently of government should have even the most dogmatic Ron Paul fan out there listening (search YouTube for examples).
What Stiglitz advocates is a 'third way' of thinking about economics. One that recognizes the power of free markets, the powerlessness of governemnt oversight in many cases, but also the requirement for regulation to level the playing-field of capitalism or to at least ensure partially ethical results.
He also believes regulation to ensure sustainability of the financial system is sorely needed in today's convluted, systemically risky, interlinked and crony-filled (his words not quite so harsh but with similar intent) financial markets. I am not sure what his stance is on fractional-reserve banking, but it seems like he would be against it (or at least in favor of stricter regulation on excessive leverage for banks).
If you are still skeptical of the vast insight that this Moral Economist has to offer us in these dark hours, simply search his name on Youtube and decide for yourself.
In closing, I note Stiglitz's remarks about being forced to resign from his position as the World Bank Chief Economist (for harsh criticism of IMF lending policies):
“Remaining silent when people are pursuing wrong ideas would have been a form of complicity,” the New York Times quoted Stiglitz as saying of his departure.
“Rather than muzzle myself, or be muzzled, I decided to leave,” he said, according to the Times.