Views of Joseph E. Stiglitz on the role and scope of the state’s influence on the economy against the background of previous views

Abstract

Motivation: In the history of economic thought up to now, one of the topics causing the fiercest disputes was the role of the state and the market in economic life. The creators of the oldest concepts suggested that the state should steer the economy. Since the beginning of the 18 th century, the supporters of laissez-faire, the invisible hand of the market, and the auctioneer have been getting more and more respect. Their creators argued that the free market works efficiently and effectively. These views were undermined by the Great Depression. In response to the deep recession, Keynesianism was created, which led to the radicalization of supporters of a strong state on the one hand, and an unhampered market on the other. Aim: The aim of this article is to present in a synthetic way the evolution of views on the resource allocation mechanism in the economy. The research problem can be contained in three questions: How have theoretical views on the role of the state and the market in the economy evolved? Which views remain relevant? What is Joseph E. Stiglitz’s contribution to the discussion on the state-market relationship? Result: An innovative solution was proposed by Joseph E. Stiglitz. He pointed out that the state and the market should not be opposed as mechanisms for coordinating economic activity. He was in favour of developing ways of cooperation between the state and the market in order to ensure the effective functioning of modern economies that are mixed economies. This solution has rendered out of date the existing dispute between supporters of interventionism and laissez-faire.