A House Critic

A longtime center-left critic of neoliberalism, Stiglitz has been a critical conscience to the most august institutions of the economic establishment. After publishing groundbreaking theoretical work across several areas of economics in the 1970s and 1980s, helping to establish the field of information economics, Stiglitz served as chair of the White House Council of Economic Advisers during the Clinton administration. There he clashed frequently with the neoliberals who dominated that administration.

The 2002 publication of Globalization and Its Discontents, effectively a book-length resignation letter from the World Bank, would transform Stiglitz into a household name. In it he advanced a harsh critique of the neoliberal global trade order known as the Washington Consensus, distinguishing himself in the process from many of his fellow post-neoliberals, some of whom have responded to the breakdown of this consensus not with proposals for a fairer global trade regime but rather a more muscular, militaristic America First economic nationalism.

A generation of economics students grew up under Stiglitz’s shadow, including the author of this review, and spent a significant chunk of time working through the various models he published. After a few semesters, the Stiglitz intellectual playbook begins to feel familiar: first outline some canonical economic model purporting to demonstrate the superiority of unfettered free markets; next introduce a seemingly minor market imperfection, an externality, incomplete contracts, or, most often, imperfect information. What becomes clear through Stiglitz’s painstaking presentation of economic models is how easily standard orthodoxies crumble when exposed to reality. It then turns out that limitations on individual economic agents, or even outright mild coercion (such as forcing everyone to pay taxes or get a vaccine), actually enhances the welfare of all.

The first part of The Road to Freedom follows a similar game plan to that of the formal papers that made his reputation. Stiglitz subjects the moral-philosophical ideas of the intellectual fathers of conservative freedom, specifically those of Milton Friedman and Friedrich Hayek, to the same methodical demolition to which his academic work subjected their simplistic economic models. Having exposed neoliberal freedom as altogether too brittle to offer a meaningful foundation for full human flourishing, in its place he offers his own, more expansive, notion of freedom.

With and Against Liberalism

At the heart of Stiglitz’s critique of right-wing freedom is its focus on freedom from at the expense of freedom to. Embracing the technical jargon of his discipline, Stiglitz defines freedom as maximizing the “opportunity sets” from which individuals are able to choose. Negative freedoms, focused as they are on liberating individuals from state coercion, are subsequently limited in what they can offer the majority.

The binding constraint on our opportunity sets is rarely an overbearing state imposing legal-regulatory prohibitions but rather material limitations like wealth and income constraints or the lack of sufficient social support to enable us to reach our full potential. In Stiglitz’s view, policies to guarantee employment, housing, education, or health care are more useful allies to the pro-freedom agenda than policies restraining the power of the state.

Stiglitz attacks a fundamental tenet not just of neoliberalism but of liberal political philosophy — the fetishization of individual choice. Classic liberalism values markets because they are the individual preference satisfaction machines par excellence: with your own money, you are free to choose whatever goods you want, in whatever quantities you can afford. For this reason, libertarian thinkers influenced by Hayek have often understood consumer decisions as analogs to voting: markets don’t judge; they respect our individual preferences. In a pluralistic society of diverse tastes and even values, the ability of markets to allow each individual to choose a customized good life from the various options for sale has a real attraction.

However, Stiglitz finds flaws with this liberal vision. One obvious shortcoming of markets is that they allocate goods based on the ability to pay, so the preferences of people without money go unmet. Unequal power can compel people to agree to coercive contracts, ranging from nondisclosure or noncompete agreements to indentured servitude. Finally, markets coerce as well as liberate: the “market discipline” celebrated by neoliberals limits the freedom to choose actions or make investments that are socially beneficial but not immediately profitable just as much as any statute.

Stiglitz, however, goes further than many of his fellow travelers are willing to by advancing a critique of liberalism core tenets rather than its excesses. Not only do markets constrain freedom of choice, but the very preferences the market satisfies so well are not intrinsic. Rather, they are often endogenous, shaped in part by the market itself. We are not born with our preferences; rather, they are conditioned by our social experiences. What if we have preferences not just about Pepsi vs. Coke but about what kind of people we want to be, a distinction between first- and second-order desires made by the philosopher Harry Frankfurt? Satisfying those kinds of preferences requires collective action to create the social environments that foster the beliefs, values, and preferences we would like to hold.

For example, one may want to be a trusting person who follows the golden rule. But a society ruled solely by the market principle of “buyer beware” may subject individuals to frequent fraud and swindling, creating a mistrustful society. By contrast, having market-restricting rules prohibiting fraud and unfair and deceptive practices can facilitate a social system that rewards trust and allows individuals to live as the people they would like to be. Seen in this light, the Federal Trade Commission’s recent attacks on junk fees, obfuscatory cancellation policies, and other tactics of business swindlers and cheats should be seen not as a violation of market freedom but a prerequisite for its flourishing.

Stiglitz’s positive agenda is a vision of what he calls “progressive capitalism,” which would foster the positive freedom he articulates in the first half of the book. Progressive capitalism includes robust government policies to constrain private wealth and power in the interests of freedom for all, including redistributive policies, antitrust and regulatory policies to tame corporate power, and support for trade unions. Stiglitz also takes pains to emphasize the importance of worker cooperatives and not-for-profit enterprises in his vision of collective capitalism, coming close to making an argument for the decommodification of goods and service that will be underproduced or produced badly under the profit motive, such as care work. The implications of some of these far-reaching ideas could be taken in quite a radical direction, but Stiglitz couches them in the mild language of the center-left technocrat.

Related, perhaps, to Stiglitz’s position as a center-left technocrat is an omission of a field of study central to some of his earlier work — namely, the lack of freedom in the workplace. Given that Stiglitz is the coauthor of the famed Shapiro-Stiglitz labor discipline model (simultaneously discovered in its essentials by radical economists Samuel Bowles and Herbert Gintis), it is surprising that The Road to Freedom has little to say about workplace struggles. The Shapiro-Stiglitz paper formally models the disciplinary power of capital over labor in capitalist business firms, and the role of unemployment under capitalism in undergirding that discipline. The model lays out how labor needs access to capital’s assets (or “means of production,” if you prefer) to earn a living, while capital needs to extract effort from unwilling human workers (who have some ability to minimize how hard they work) to earn a profit. This model shows how capital’s power to discipline and command labor comes ultimately from the threat of termination, which in turn depends on the existence of unemployed labor (or the “industrial reserve army,” if you prefer), and how wages are higher when capital has little information about labor’s effort levels (shirking is power).

Stiglitz clearly has within his arsenal tools with which he could make a critique of workplace coercion, expanding in the process his discussion of freedom to include the domain in which most adults spend the majority of their time. His omissions are especially notable given recent work extending the labor discipline model to account for labor-disempowering features of the modern workplace, like intensive surveillance of workers. But perhaps the omission is not so surprising after all. While Shapiro-Stiglitz models something that looks a lot like a class struggle between capital and labor, its authors do not call it that.

For all the insights of Stiglitz’s information economics, it, much like the orthodox neoclassical economics it critiques, is ultimately blind to class. Instead of David Ricardo, Karl Marx, or John Maynard Keynes’s discussion of social groupings like capital and labor, we have models of heterogeneous agents with varying “factor endowments” contracting with each other in markets and firms.

Finally, while Stiglitz’s demolition of neoliberal theories of freedom is thorough and convincing, his own positive theory of freedom remains underdeveloped. There’s an old economics joke that there are two kinds of economists: those who read books and those who write books. While Stiglitz has undoubtedly read widely on the subject of freedom, he chooses not to display it in this book, which reads rather much like a book-length op-ed. The argument is largely theoretical and deductive, taking place in Stiglitz’s own head rather than in dialogue with other writers on the subject (with the exception of some rather surface-level treatments of Hayek, Friedman, Adam Smith, and John Rawls). There are few citations, and there is no bibliography or index.

This failure to engage with the breadth of insight within his field has had the effect of constraining Stiglitz’s vision of political possibility. Compare The Road to Freedom’s discussion of its key concept to that found in the work of another Nobel-winning economist, Amartya Sen. Sen’s 1999 Development as Freedom, written in an equally accessible style, contains not only richer discussions of the full range of competing theories of freedom, equality, and justice — from liberalism to utilitarianism to Rawlsian distributive justice and beyond — but also a complete reconstruction of welfare economics. Indeed, one could interpret Sen’s “capabilities” approach to economic freedom as a richer version of Stiglitz’s “opportunity sets.” For example, Sen’s capabilities include not just the set of opportunities available to each person but also the form of life (“functionings”) they are actually able to obtain with them. For Sen, a person’s “capability” entails not just their opportunity sets but their effective freedom to choose and embody the kind of life that they value.

Taken on its own terms, The Road to Freedom is a powerful attempt to recapture the rhetoric of freedom from those who would bring death to the lamb as the price of freedom for the wolf. Nevertheless, there is something a bit dated about Stiglitz’s intervention. The vision of neoliberalism embodied in the Washington Consensus is no longer ascendant. With the turn away from 1990s-style globalization across much of the West, the issue with which political elites are concerned is not whether the state should regulate capitalism but how it should do so. Seen within the context of first Donald Trump and later Joe Biden’s turns against free trade, and the latter’s embrace of a subsidy-heavy version of industrial policy (with some encouragement of unionization), the world of unregulated free-market capitalism attacked by Stiglitz appears to be fading.

What is at stake today is not so much a vision of positive versus negative freedom but rather competing ideas of positive freedom: one preferred by an increasingly chauvinistic and authoritarian right, and another by the Left and progressive forces seeking to reverse rising inequality, defend against attacks on bodily autonomy, and protect the biosphere from destruction. With the political center meanwhile seemingly grasping about for a post-neoliberalism that somehow blends social democracy and barbarism in just the right proportions (perhaps mild support for unions coupled with barbed wire at the border), articulating that positive vision of freedom seems the most urgent task for the Left today.