Stiglitz’s Sticky Prices
For decades, the assumption underlying mainstream economics was that Adam Smith’s invisible hand worked its magic seamlessly, keeping markets in equilibrium during changes in supply and demand. It was Joseph Stiglitz who showed that the invisible hand “is invisible at least in part because it is not there.”
WASHINGTON, DC – For a long time, the assumption underlying much of mainstream economics was that the invisible hand worked its magic seamlessly. Prices moved smoothly up as demand outpaced supply and rushed back down when the tables were turned, keeping markets in equilibrium.