2018 Chapters (Layout Features)

Markets, States and Institutions

Stiglitz, Joseph E.

The chapter describes both the evolution of thinking—from a single-minded focus on markets to a broader inclusion of institutions—and how even that broader perspective is excessively narrow and, too often, insufficiently nuanced. Markets do not operate in a vacuum; they need strong institutions including the state, interacting among themselves to create the right checks and balances. Market economies, left untampered, lead to forces that threaten their own survival. Too often they lead to greater inequality and injustice; erosion of trust; and weakening of the state. The institutional checks and balances that are so vital for the functioning of institutions and markets do not work when there is excessive inequality.