(2003-10-28) Kling Defends Powell

Arnold Kling compares Michael Powell to F A Hayek and his critics to Joseph Stiglitz. Joseph Stiglitz, awarded the Nobel Prize in 2001, wrote, "But information economics does not agree with Hayek's assertion that markets act efficiently. The fact that markets with imperfect information do not work perfectly provides a rationale for potential government actions." Hayek would have the government tolerate messy competition. His point is that with the optimal outcome unknown, government resolution of issues shuts off the learning process that market competition provides. Stiglitz sees the messiness in real-world economies, and he claims to have the right solution in every case.