Joseph Stiglitz: evaluation

Transcript context

…If I think about your 1980 piece with Sandy Grossman, what are your current views on why trading volume is so high? It seems to violate a lot of rationality theorems. Well, if someone’s trading with you, you might plausibly assume they know at least as much as you do. Fischer Black famously said, “We just need to put trading in the utility function.” That’s a kind of deus ex machina. What do you think now, 44 years later? Well, I think the basic idea of that paper is still obviously correct. The title of that paper was “On the Impossibility of Informationally Efficient Markets.” It was an argument against the view that was held by people like Eugene Fama that markets were informationally efficient, that they transmitted efficiently all the information from the informed to the uninformed. We made the obvious observation that if that were the case, there would be no incentive for anybody to gather information. So the market might be transmitting information, but it would be all free information. It would be information that nobody had done any work to collect. That idea, actually, in another context worries me very much today, that with Google and AI scraping so much information off of our newspapers, off of our podcasts, off of everything they can get a hold of, they’re trying to appropriate the value of the knowledge that’s been created by other people without paying for it. If they succeed in doing that, of course, that will decrease the incentives for others to produce information of high quality and of value. It’s that kind of interaction that was at the heart of our 1980 paper, and the themes that we talked about there are still the critical themes that we’re talking about today. You think today that liquidity from market makers is oversupplied or undersupplied relative to a social optimum, say, in New York?…

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