I just started reading his The Price of Inequality and it's pretty good.
I've written about Mirowski's great book recently Never Let a Crisis Go to Waste-a kind of dystopian tale of Neoliberal intellectual dominance to explain why so many zombie ideas have survived the 2008 Crisis and the subsequent slow recovery.
Mirowski tends to see Stiglitz as part of the problem-as he is still a New Keynesian Neoclassical. Still, Stiglitz from within the NC establishment thinks out of the box more than anyone. I do think that time may show that the NC baby must indeed be thrown out with the bathwater-I really don't get why Macro needs 'microfoundations' either.
Still, like it or not for the foreseeable future NC will be the dominant school though it's position is much more precarious than it was prior to 2008, certainly much less than the Era of Good Feeling during 2003 we were were hearing that the Great Moderation showed that the business cycle was solved and we could just forget Macro altogether-as we know exactly what to do here-and concentrate on NC Micro. I think there has been a fissure from within as well, as the old fissures between Saltwater and Freshwater has reopened.
Krugman has also made some-admittedly tentative-noises about maybe there's something lacking even in the original NC Synthesis of Samuleson and Hicks-for Krugman the Patron Saints. So even within NC there are clearly changes and fissures. It's a much more heterogeneous school than it was 5 years ago. Then we have the heterodox schools on the outside which will assert more pressure. Where we end up only time will tell but it will be interesting to see where we are in 10 t0 20 years in Macro.
Most of what Stigliz writes I agree with-at least to the point where I am and I'm still early in the book (pg. 49)-however, one thing I'm not sure about is monopolies. I don't know how much they are an evil and how much they can even be beneficial.
Of course, monopolies are a problem for NC models which claim that over time 'excess profits' tend towards zero-so they shouldn't even exist with perfect competition.. Stiglitz argues for the abusiveness of monopolies. He lists their ill effects as
1. By driving out competitors they can inflate prices and inflict pain on the consumer.
2. The monopoly achieves it's dominance and high market share not by innovation but through rent seeking which Stiglitz defines as achieving great profits in ways that add no value to the economy. He offers a classic case of abusiveness of a monopoly as Microsoft.
3. He talks about the abusive practice of producing at below capacity to keep prices high but driving up capacity and lowering prices massively if competitors try to break in.
On number 1, this makes sense logically but it seems that even then there are limits to how high they can raise their prices. Whatever you think of Microsoft, Windows has steadily dropped in price. I mean the real complaint has not been that it's so expensive but that it drove out competitors that were actually better innovators. I mean what does the empirical record say about this-does it support this theory of raising prices endlessly? My guess is that there are cases of abusive monopolies charging exorbitant prices perhaps particularly in captive Third World countries.
Still, it's not always the case. Indeed, there are benefits in certain kinds of monopolies it seems to me. One of the worst uses of anti-trust law was when the DOJ took so long to grant Sirius and XM a merger as it would be anti competitive. In this case, competition-in the sense of having many firms-was not a feature but a bug as the only way the industry could survive at all was via combination so that both firms could eliminate duplicative costs.
It wasn't about charging a huge price for service-as the market was hardly captive-it was about survival. Indeed, the classic example of beneficial monopoly is the railroads. The era of heavy competition in the railroad industry in the 19th century was a little shop of horrors. There was huge overcapacity and too much duplicative tracks being built. The consumer whether individual or business was greatly inconvenienced as often they had to take 2 or 3 different trains for one trip-as different companies had the rights in different states and areas.
Standardization as Stiglitz acknowledges is often a very beneficial thing. To be sure, Microsoft's tactics in achieving dominance were hardly laudable and did often drive out better products. Still there may be some benefit in standardization in principle. At this point while they may have the operating market, that's become a much smaller fish in a bigger pond
This doesn't mean that we shouldn't have antitrust laws and that there aren't abusive monopolies just that I don't think it's black and white. At the end of the day the consumer wants low prices and great products. If they get that they don't care how many companies are in an industry. At least sometimes having just one or a few companies in an industry achieves consumer satisfaction in these terms
The question of what a company doses to achieve it's dominance-how much it drives out innovation-it depends. In the case of the 'monopoly' in satellite radio the answer is not at all. Microsoft wasn't a great innovator and achieved its dominance by what Stigliz calls rent seeking. However, the answer is quite different with Google.
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