Economics Famous Economist Joseph Eugene Stilgiltz
By: Ricky Chan
Joseph Eugene Stilgiltz is an American economist and professor ho currently teachers at Colum!ia "ni#ersity$ Joseph E Stilgiltz as !orn in % th Fe!ruary& '%()* currently aged +, is a contemporary economist ho has recei#ed the -o!le .rize /011'2 and the John Bates 3edal /'%4%2$ 5is reputation has !een further endorsed !y !eing one of the orld6s most fre7uently cited economists$ Joseph Stilgiltz as !orn in 8ary& 9ndiana& '%()& here he !egan his studies and as the president of the student go#ernment$ :uring Joseph6s time in 8ary& Joseph de#eloped many economic pro!lems hich stimulated his later contri!ution to economics as 7uoted from the man himself ;Certainly& the po#erty& the discrimination& the episodic unemployment could not !ut strike an in7uiring youngster: hy did these e<ist& and hat could e do a!out them$= Joseph6s mother6s family as -e :eal :emocrats and orshipped the F:R& his uncle as non>la!or despite !eing a layer and his father as a Je?ersonian :emocrat& a small !usinessman ho !elie#ed in self>employment and self>reliance$ From '%+1 to '%+)& Joseph studied at Amherst College& a place hich !ecame his ;most formati#e e<perience=$ :espite studying many courses& none as more interesting to him than Economics$ Joseph Stilgiltz then mo#ed to the 39@ to continue his studies here he !ecame a professional economist& here he as taught !y ( -o!el .rize inning professors$ After the 39@& Joseph Stilgiltz researched at the "ni#ersity of Chicago under the guidance of 5irofumi "zaa ho had recei#ed a -SF grant$ After his education& Joseph Stilgiltz held many academic positions in the "ni#ersity of Cam!ridge& Aale& Stanford& :uke& B<ford& and .rinceton$ Currently& Joseph Stilgiltz is a .rofessor at the "ni#ersity of Colum!ia& employed in the :epartment of Economics& Business School& School of 9nternational and .u!lic A?airs and is the editor of @he Economists Coice$ 5e has also !een B!ama6s ad#isor& !efore sharply criticizing B!ama Administration6s Dnancial>industry rescue plan& descri!ing its contri!utors Eeither in the pocket of the !anks or they6re incompetent$= Joseph Stilgiltz has made to signiDcant contri!utions toards economic thought outside of !eing a professor and a political ad#isor$ 5is most signiDcant contri!ution toards economic thought as his research on screening& techni7ue used !y an economic agent in order to e<tract otherise pri#ate information from another& inside the economic theory of information asymmetry$ 9nformation asymmetry occurs during a transaction in hich one party possesses more information a!out the other creating an im!alance in poer and an unfair disad#antage to one party$ As a result& Joseph Stilgiltz pioneered a ne method to !alance out this information asymmetry& knon as screening$ @he concept of screening in#ol#es the under> informed party inducing the other party to re#eal their information unintentionally$ @o e<amples in hich screening is used e<tensi#ely are life insurance and !anking$ :uring the selling of life insurance& di?erent people can create a false impression of the risk le#els& putting the insurance company at a disad#antage$ 5oe#er& ith the de#elopment of screening& insurance companies no pro#ide the details of di?erent insurance policies$ @he loer risk customers ill ha#e loer premium !ut less Economics Famous Economist Joseph Eugene Stilgiltz By: Ricky Chan protection hilst the higher risk customers ill ha#e higher premium !ut most protection$ @hrough this process& the company can sie#e through the customers !y inducing them to choose a package hich ill re#eal the general !ackground and ena!le the insurance company to de#elop an understanding of the customer6s risk le#els$ Similarly& the !ank uses a similar method to measure ho much the !orroer and can return ensuring the !ank ill not !e lending money to a !ankrupt person$ @he process of screening has !een taken a step further through inter#ies& hich allos the mem!ers of the companies to in#estigate and meet the customer& alloing the !usiness to de#elop a !etter understanding of their consumers$ Joseph Stilgiltz6s other contri!ution is the idea of eFciency ages and its e?ects on unemployment$ Stilgiltz6s !asic idea as that companies are illing to pay a higher age in order to keep their orkers at the company$ 5oe#er& through his studies& Joseph realized that if e#ery!ody6s age as set so that there is an assumed no unemployment& a orker ill !e less producti#e since if he is Dred ill then mo#e on to other companies$ As a result& the Drms ill raise their age !ut employ feer people& in order to keep high producti#ity$ @his loered num!er of Go!s ill result in an increase in competition and people ill !e more attracted to ork ith higher age lea#ing the loer>aged Go!s loer$ @his ill result in unemployment in the long>term$ Joseph Stilgiltz has pro#en himself to !e an inno#ator and an acti#e economist ho is illing to accept challenges and is illing to continue research in order to make the economy !etter$ 5is main contri!ution to economics& screening on information asymmetry& has !een e<tremely inHuential o#er the economy$ 5is methods of screening ha#e !een used signiDcantly across many nations& sectors and economies and ha#e !ecome an e#eryday prospect$ @hrough his studies& many companies ha#e !een !etter prepared hen assessing their consumers& alloing these !usinesses to ensure they are not a?ected !y this unfair disad#antage of knoledge$ @his has alloed the market to !ecome more free and fair ensuring companies are not a?ected !y information asymmetry$ 5oe#er& Joseph Stilgiltz6s contri!ution toards the economy may sloly dindle in the future unless his theory is slightly altered to cater for the ne technology$ "nder the technological !oom& consumers not purchase online and ha#e e<ploited a loophole in Joseph Stilgiltz6s theory of screening& rendering it less poerful and tipping the scales of !ack toards the consumers$