Unsolved problems, that's one of the great signs of progress in my opinion.
Knowledge is a free good. The biggest cost in its transmission is not in the production or distribution of knowledge, but in its assimilation. This is something that all teachers know.
Now virtue may not always be its own reward, but in any case it is not usually bought and paid for at market rates.
One way of looking at Impossibility Theorem is that we proposed some criteria for what a good system should be: what is it you want from a voting system, and impose some conditions. And then ask: can you have a voting system that guarantees that?
Markets are not, in my opinion, a full solution to any problem. The obvious problem they don't meet is the concerns of the welfare of individuals who may get lost in the operation of the system - the distributional question. We've seen this growing as we go further and further toward a market ideology in the United States and the United Kingdom. We've seen a decline in the welfare of the working poor, leaving aside any other pathologies, just the working poor, a very distinct increase at the very top levels.
Vast ills have followed a belief in certainty.
The world is changing. We're not really proceeding on a stationary basis.
One thing I learned from meteorology is that being an actual science was no guarantee of exactness.
Usefulness depends on tractability.
I think the idea that a society has to be responsible for all of its citizens, those who do well and those who do not, is really a precondition of a good society.
We have to be more modest in what we claim.
The MD is well aware that the forecasts are no good but he needs them for planning purposes.
I'm struck by the fact that by and large equity capital doesn't play a big role in new financing; it's either bonds or internal financing but not really equity. And therefore, it's not clear that anything which improves the equity markets has really much to do with the productivity of the economy as a whole.
Education is still, in spite of private education, a state matter.
It seems to me that at least as far as the financial markets are concerned, there is increasing evidence against rational expectations, even at the macro level.
One doesn't like instabilities in markets; they may be damaging, but probably not fatal, as the October '87 crash showed. It turned out to be essentially inconsequential. So if that's true, I'm not very worried about the welfare of those who are investing any more than I am about the welfare of those who go into casinos.
I think that systems that are based on employment are illogical and attempts to meet them create all sorts of unnecessary complexities.
I think on the efficiency level, not only the distribution level, capitalism is a flawed system. It probably has the same virtues as Churchill attributed to democracy: It's the worst system except for any other. And I think that's right, but it cannot be thought that some unmitigated belief in free markets is a cure even from the efficiency point of view.
The rate of growth of the relevant population is much greater than the rate of growth in funds, though funds have gone up very nicely. But we have been producing students at a rapid rate; they're competing for funds and therefore they're more frustrated. I think there's a certain sense of weariness in the intellectual realm, it's not in any way peculiar to economics, it's a general proposition.
Venture capital has done much more, I think, to improve efficiency than anything.
There's only one problem that bothers me. And that's something my theorem [ of Impossibility] really doesn't cover. In my theorem I was assuming people vote sincerely. The trouble with methods where you have three or four classes, I think if people vote sincerely they may well be very satisfactory. The problem is the incentive to misrepresent your vote may be high.
From the time I first understood economic principles, I was always concerned also that any system be operated on an efficient basis, which meant decentralization because knowledge is not concentrated anywhere. It's based on motivation, and so these are the advantages of, say, the cautious case for capitalism, that the market system is efficient.
There are all sorts of institutions in the economic world which depart from the simple price/market model which I worked on in an earlier incarnation and which has been sort of the mainstream of economic theories since Adam Smith and David Ricardo. There are all sorts of contractual relations between firms and individuals which do not conform to the simple price theory - profit-sharing schemes and so forth - and the explanation for these suddenly became clear. We now understand why these emerged and that they are based on differences in information in the economy.
I am not really inclined to think there is any very effective regulation of the derivative securities markets that would be useful. People who go into it essentially ought to know what risks they're taking and I don't see any useful regulation.
The intrinsic social structure, the family structure and so forth, is certainly in a very bad state. And I think that this is showing up in productivity. I think part of the reason, and I can't prove this, we're seeing a decline in some places is the breakup of the family, which is partly the result of an extreme form of individualism.
