Joe Stiglitz is the leader of a school of economics that, for the past 30 years, has developed complex mathematical models to disprove the idea of economics devoid of regulations. The subprime-mortgage disaster is almost tailor-made evidence that financial markets often fail without rigorous government supervision.
The work that won Stiglitz the Nobel in 2001 showed how "imperfect" information that is unequally shared by participants in a transaction can make markets go haywire, giving unfair advantage to one party.
The subprime scandal was all about people who knew a lot—--like mortgage lenders and Wall Street derivatives traders—--exploiting people who had less information, like global investors who bought up subprime- mortgage-backed securities.
As Stiglitz puts it: "Globalization opened up opportunities to find new people to exploit their ignorance. And we found them."
The Republican party demolished what economic regulations that existed when they came to power in 2001 while ignoring for nine months the warnings about Al Qaeda, used as one justificaton for invading Iraq.
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