Economist Joseph Stiglitz: "The way we measure performance is often wrong."

Joseph E. Stiglitz, courtesy for photo and text excerpts to http://www2.gsb.columbia.edu/faculty/jstiglitz/bio.cfm

Joseph E. Stiglitz visited Oslo today and talked about the social responsibilities when making investments: "You can do well by doing good."
Investments in responsible manners for private companies as well as public institutions "can be good for returns" as well as for society, was the overall message. This "doing-well-by-doing-good" may happen "especially when social responsibility anticipates broader social movements, or when social responsibility contributes to better corporate governance."
Stiglitz did not say anything entirely new. Yet as Nobel prize laurate in Economics his voice can be heard. In Oslo he was heartily welcomed by Kristin Halvorsen, Norway's current minister of finance. At 10 o'clock a Monday morning the meeting room was full and a lot of journalists were also eager to make interviews afterwards e.g. TV2 was interviewing him after his presentation.

In Oslo this morning. Stiglitz started his speech in the Departmental building by outlining how "efforts of theft" in fact can supersede efforts of doing good. Innovation can thus become negative in its consequences. He further elaborated how firms tend to oppose a lot of legislations, thus influencing what is actually "legal." Firm's behaviour may also become geared toward "how to cheat the government" or even using the same procedures to cheat multiple stakeholders. This happens in private sector investments, more often than one believes, he explained, which has led to the scandals of Enron and so forth. Stiglitz opposed the narrow moral of self-interest going back in economics to Adam Smith he said (though Smith may have been somewhat misinterpreted, I've heard from other sources, such as UiO prof Kalle Moene.)
Anyway, what is interesting is that Stiglitz firmly claimed that "the way we measure performance is wrong." He called for a broader view beyond monetary measurements, such as including what he called "social returns." He added that "the social returns may be more difficult to quantify" or measure. But with "longer time horizons" and the idea of (investing also for) social returns, this opens up for the possibility of firms that might be doing well by doing good. Stiglitz explained that this seems to be a paradox, because according to standard economics, if you constrain investment, you have a smaller set. One would thus expect to do worse...instead one may rather do well, which is a puzzle according to standard economics, he reflected. Stiglitz also called for more attention towards spillover effects or what in economics are called externalities (external effects; can be positive and negative).
Birgit

PS Stiglitz also got some questions regarding Milton Friedman's contribution, and he responded by distinguishing between M. Friedman the politician and the economist, adding that "most of his ideas (political ones) have been rejected" and through an example (Chile and Pinochet) he showed how they had led to debt and failures.
For EXTRA info on Stiglitz: see e.g. his official website (linked above), a few facts: Stiglitz was born in Gary, Indiana in 1943. A graduate of Amherst College, he received his PHD from MIT in 1967. He is now University Professor at Columbia University in New York and Chair of Columbia University's Committee on Global Thought. He is also the co-founder and Executive Director of the Initiative for Policy Dialogue at Columbia. In 2001, he was awarded the Nobel Prize in economics for his analyses of markets with asymmetric information. And he was a lead author of the 1995 Report of the Intergovernmental Panel on Climate Change, which shared the 2007 Nobel Peace Prize. Stiglitz was a member of the Council of Economic Advisers from 1993-95, during the Clinton administration, and served as CEA chairman from 1995-97. He then became Chief Economist and Senior Vice-President of the World Bank from 1997-2000. In 2008, he was appointed by French President Nicolas Sarkozy to chair a Commission on the Measurement of Economic Performance and Economic Progress, and he serves on numerous boards, including Amherst College's Board of Trustees and Resources for the Future.

It is worth noting...
- that Stiglitz helped create a new branch of economics, "The Economics of Information," exploring the consequences of information asymmetries and pioneering such pivotal concepts as adverse selection and moral hazard, which have now become standard tools not only of theorists, but of policy analysts.
According to his website, he has also made major contributions to macro-economics and monetary theory, to development economics and trade theory, to public and corporate finance, to the theories of industrial organization and rural organization, and to the theories of welfare economics and of income and wealth distribution. In the 1980s, he helped revive interest in the economics of R&D.