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Directing capital to people or firms who can't afford to service it amounts to misallocating resources, and it is a form of market failure.
By misallocating resources to its protected, bankrupt state sector, China now has bank debt in excess of 100% of GDP.
That creates another infrastructure and employment surge in the real estate industry, further misallocating resources.
He also says that we can't achieve growth by going back to "consuming more than we're earning" (credit card debt) and building residential homes (misallocating resources for the benefit of building bubbles).
But when that competition takes the form of preferential treatment for specific businesses, not only is it not "admirable," it interferes with interstate commerce and undermines the national economic union by misallocating resources and causing states to provide too few public goods.
Protection of public-sector jobs trumps any economic rationale.This spending binge is not only misallocating resources, but also crowding-out private-sector credit.
Similar(53)
The result: misallocated resources.
But tax expenditures also misallocate resources.
Governments could hardly misallocate resources that would otherwise be unemployed.
Just as with normal consumer-price inflation, asset-price inflation can misallocate resources in the economy by distorting price signals.
That Mr Stiglitz, a great and original theorist, should spend his time writing a "me-too" globalisation book rather proves his point that markets sometimes misallocate resources.
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Justyna Jupowicz-Kozak
CEO of Professional Science Editing for Scientists @ prosciediting.com