The Scenic Route to Serfdom: Commentary on Joseph E. Stiglitz’s “The Road to Freedom.”

A Commentary · Joseph E. Stiglitz

The Scenic Route to Serfdom

The destination is worth wanting. It is the road that should give us pause.

I · Where the Road Started

The View from Gary

A diagnosis handed to him by the streets he grew up on.

Arguably, the most difficult point to tackle a commentary on such an esteemed economist is to understand the roots of his vision. To understand why Joseph Stiglitz wrote The Road to Freedom it is essential to know where the so-called “Road” began. Born in 1943, Gary Indiana – Stiglitz observed a city built by and for the U.S Steel Industry and one that he spent his entire childhood watching slide into rust. The brave men who worked in this heavy industry were subject to the traditional model of capitalism – when cheaper labor is found the old gets discarded. Even Stiglitz himself mentioned that the two questions greatly concerning his work are: Why do markets fail, and why does economic power naturally translate to misery. These questions weren’t handed – they were built on the foundation of his childhood. For what is worth, the book we are exploring is treated more as an ideology, rather than how we are going to – as an observation.

Well, in 2001 his observation became a theory, and Stiglitz won a Nobel Prize for work on information asymmetry. Unglamorous but devastating insight that buyers and sellers rarely know the same things. Fundamentally, markets built on the notion of Friedman and Hayek, having the perfect ability to price and distribute often end up in mispricing, misallocation, and in cases like 2008 – collapses. Stiglitz’s life work was to disprove what Friedman tried to advocate for, and to prove the inefficiency behind the neoliberal case for laissez-faire, resting on the First Welfare Theorem. As it turns out, unregulated, competitive markets do not produce efficient outcomes. Not only did Stiligtz try to disprove the traditional neoclassical approach to economics, but he tackled the border assumptions that the model was built on. Most importantly, the principle of perfect information, which almost never holds in a real world scenario, but even more so Joseph E. Stiglitz argued that when the fail occurs, markets crumble accordingly.

Following his advancements in academic theory, his fieldwork came into play. For three years he was Chief Economist at the World Bank from 1997 to 2003. He watched the IMF give out the same “medicine” to the rest of the free world. Practices such as deregulation in financial markets, privatisation and liberalization quickly swept countries in economic crises from the former Soviet Bloc to East Asia. The very medicine that was supposed to cure the diseases, deepened the damages by postponing them to the near future. Stiglitz’s clear advocation for balance and his vocality on the matter cost him the position he was at. Taking away from his practical experience he did not develop a sort of phobia towards markets but one towards the dogma that a standardized neoliberal template applied across different economies would work.

The trajectory that he endured, the deindustrialised childhood, the theory of why Adam Smith’s invisible hand is often invsible because it is simply not there, and a front-row seat to the failure of globalisation is what produced the author behind this work. With all fairness to his outstanding work in economics we argue that it produces a blindspot which we will discuss later. The path of an economist shaped by market failure is well equipped to diagnose failure and naturally less able to foresee whether the cure is effective or even risks for a spread of the disease. Remember these final sentences for the rest of this commentary, as they would come rather useful.

II · Stealing the Word Back

The Road to Freedom

Not the absence of constraint — the size of the life you can actually reach.

Now at focus, his work in The Road to Freedom, and how it starts with a provocation. For active readers and academics it is an immediate reference to two fundamental pieces of economic theory in the 20th century. Specifically, Milton Friedman’s Freedom to Choose and Friedrich Hayek’s The Road to Serfdom.  At their core both pieces argue for the same principle that economic and political freedom are the same. Further, every expansion on the powers of a state over the unprecedented free will of a citizen will end in tyranny. To a large extent, they perceive the market as a form of liberator to society and a guarantor for “freedom”. So from here, Joseph Stiglitz sets off on his work to steal the world back from neoliberalism. With that said, his approach is to dismantle the capture of neoliberalism on freedom by defining what the word actually means.

Without a doubt, the most powerful move that Stiglitz utilizes is to attack the neoliberal definition of freedom. Essentially he disagrees to perceive freedom as the absence of any constraint. This being a reformulated version of Isiah Berlin’s “negative liberty” claiming that freedom should be left alone, by both the state or anyone else. Where Stiglitz disagrees is not a philosophical debate on the term, but that the definition does not coincide with the crowded world that we live in. He argues that one person’s freedom is another person’s chain. To give proportion to this definiton we can think of it in the following way: The freedom for a facory to pollute the atmosphere comes at a cost for an asthmatic child’s breathing. In financial terms, the creditor's freedom to enforce a contract is the debtor's unfreedom to eat. Even Isiah Berlin pointed out that “freedom for the wolves has often meant death for the sheep. Once you accept that freedoms collide, "leave people alone". At this point the notion seizes to be the answer to the question of freedom, but a framework for the question itself. The main area of concern would be – whose freedom, at whose expense?

With the use of the negative defintion, Stiglitz quantifies freedom inside of what economists call a person’s opportunity set. In simple terms, an opportunity set is the objective range of choice available to a person. To bring this point further, we can distinguish in this idea Amartya Sen’s capabailities approach – in our case it just wears an economics coat. While this would be a tendency for the rest of the commentary, we will use practical principles to grasp the ideas behind the majaor clause. A blue-collar worker with no savings and no alternative job is not “free” to refuse awful terms from his current employer. Why? Well, simply because no law compels him. His opporunity set is just a single point with no other choices. With that in mind, Stiglitz believes that negative factors such as poverty, monopolies, insecurity and ignorance shrink the opportunity set and form “unfreedom”. Therefore, the theoretical pivot is complete: while a neoliberalist template sees the state as the “theif” of freedom, Stigliz uses it as a potential instrument to expand freedom through – education, healthcare, insurance and other as such. Instruments that prevent the strong from limiting the choices of the weak.

So, the philosophy behind the choice of opportunity set is placed. Therefore, where does the economics and science stand? Stiglitz, spent his entire career trying to prove that markets do not simply coerce, but after some time – they fail. By his words, a neoliberal society’s actions generate externalities where information is asymmetric and power is concentrated in upper classes. The "free" market is a construction, shaped by rules – of property, contract, bankruptcy, competition –  that someone wrote and someone can rewrite. The market does not have an inherent state of nature so that it can be left undisturbed. Only question is: of whose interests the rules serve? Continuing on this notion, deregulation from markets isn’t the removal of coercion, but a redistribution of who holds power.

Under these ideas, Stiglitz builds his platform of freedom on the basis that a free society is one that collectively produces, rather than simply being protected individually. Foundational principles such as, the right to security and the right to a livable environment are necessary to a well functioning society. And they are the preconditions needed for anyone’s meaningful freedom. He argues that when markets are left alone, they will never supply such conditions. A genuine vision with a very coherent explanation and understandable approach. But it is worth granting it in full before asking the difficult question.

Because the difficult question that we ought to answer isn’t the very idea of achieving freedom, but whether we can get to said freedom. Is it really possible, even through balanced means such as Stiglitz’s views – and what that journery costs to who enforces it?

III · The Road, and the Wolves in the State

How Impossible?

Follow his own economics honestly, and the road does not arrive.

Let’s imagine we Grant Stiglitz his destination in full. Concede that freedom-as-opportunity is the richer idea, that markets coerce, that the state can in principle expand the opportunity sets of the many. The true weakness of his work isn’t the idea or the map of the book, but the application. Even Stiglitz, who spent an entire career studying the best route towards achieving this goal, knows that it is rarely a straight line. Even more so, he is strangely incurious to the path his programme must cross.

 The Cost – While Stiglitz’s intentions for universal healthcare, accessible education and an endless expansion to societal benefits are positive, the prices to pay are not small. Let’s think for a second, does this sound familiar in any way? Do these state-owned entities remind us of some periods of history? Indeed, this all sounds sublime considering the world that we live in. But the uncomfortable truth here is that these are not some minor adjustments to the already existent system. This geniune floor, or as we can call a safety net, will require a permanent structural claim on national output. What I firmly dislike is that Stiglitz tends to present the issue matters concerning the change as some form of political will issue. He claims that the funds are present and the rich are abstaining from sharing, and getting taxed. Taxation at the levels his vision implies changes behaviour - where capital locates, whether the marginal firm hires, how hard the marginal person works - and an economist of his sophistication knows the Laffer curve has a downward slope even if it is nowhere near where the right claims. We could argue that there is an evident trade-off between the guranatee on the size of the opportunity set and the size of the economy that funds them. His work, The Road to Freedom refrains from describing these trade-offs. If we were to discuss the final destination it all sounds too good to be true, which it is. The ideas behind the model are correct, but we have to assume that the hardest part of the arithemtic is complete.

Enforcing the Model – By belief, here is the weakest point of this work. Structurally, the issue of overlooking the same principle causing the disease, in the medicine that you provide as a cure. He built a theory under the notion that neoclassical economics is not an efficient model, to which he would be correct, but his Nobel work showed that markets fail because the actors within them have asymmetric information, misaligned incentives, and the room to exploit both. Well, if we apply this logic what’s stopping us to treat governments in the same way. We have to remember that governments are made of actors too, and every underlying issue that Stiglitz identified in the market, tends to reappear, magnified in the government meant to correct it. A regulator often knows much less about the firm, compared to the firm itself. Burreaucracy has it’s own secrets, witholds of information and incentives. A theory developed by American economists James Buchanan and Gordon Tullock, named the Public Choice Theory engages in exactly the same scrutiny Stiglitz does to the market, only to the state. Stiglitzian economics pointed at the government instead of the firm or the market. He applies this skepticism about self-interested players in the game only to the side of the free market, which omitts serious considerations when talking about regulatory practises. The so-called state that he belives in would be the International Monetary Fund, in which he spent years watching it fail catastrophically. The man did write the fieldwork, but he proceeds to forget what actually happens in principle.

Global Shocks – With the heavy assumption that the cost of the restructuring could be borne by society and there would be a government, competent enough to lead the change and enforce the rules, it would be a treacherous terrain to go through. In the past two decades the world has gone through pandemics, financial crises, wars, energy shocks, supply chain problems. The truth is that these external factors are not a contingency for which an economy could plan, but a test of the established system and its ability to survive the “bad weather”. While Stiglitz’s programme revolves around cooperation and trust, it is precisely the kind of program that gets disrupted most violently, due to external shock.  When a huge crisis hits a country, the state does not take a level-headed decision that consolidates – it goes through rationing, limiting, printing money and trying to keep the country afloat. But the most important risk is that it does so through picking winners under pressure, and with the same imperfect information and biased incentive that Stiglitz’s own work scrutinizes the markets for. The main bias in his analysis is that he uses crises as factual cases for the failure of markets and a time for governments to step in. He is far less willing to see that crises are also where his own state is most likely to fail, and to fail publicly, in ways that discredit the whole project.

Extremism and imabalance – Back to where this all closes and turns into a very vicious circle. A few paragraphs ago I addressed the question if this governmental system of oversight reminds us of something. Well it does – socialism and authoritarian regimes. But before we dive into any deep explanation, I want to make a distinction that this arguments doesn’t regard Stiglitzian economics as authoritarian or socialist, but one that is very hardly enforceable. When the ambitious state overreaches, or is captured, or stumbles through a shock and leaves people worse off than the promise implied - the reaction is not a polite return to the drawing board. It is backlash. What clearer of an example than the Weimer Republic and the raise of the National-Socialist party in Germany? High expectations, which are not met by a political rulement are the most reliable fuel for political extremism. The gap between what was promised and what was delivered is where extremism starts to grow and poison society. A population striken by inflation, poor living conditions and dysfunction is very likely to take down the governing body. By all means if there was a perfect world in which a state agrees on a balanced plan of action and with full cooperation of society that would be great – and still that does not imply that the perfect plan and execution would not fail under external threats. The theory concludes that elites lied and it goes looking for someone who will burn the whole arrangement down. The overreaching corrective state, in other words, manufactures the very reaction that empowers the strongman – and the strongman is the negation of every freedom, positive and negative, that Stiglitz set out to protect.

And this all is the quiet tragedy of Joseph E. Stiglitz’s theory of the world and The Road to Freedom. The whole reason the title is more apt than its author intended. Hayek expressed a fear that the well-meaning expansion of the state would ultimately end in the loss of freedom. But following the logic of Stiglitz himself, the simple of existence of imperfect information, privately incentivised institutions and self-interested actors, means that what made him famous does not deliver on the safety promises that he made. The scenic route, it turns out, has a way of rejoining the old road to serfdom. Stiglitz saw the wolves in the market clearly. He was less willing to admit that they den in the state as well.

All data used in this article is derived from publicly available institutional reports and industry analyses.

This article is for informational purposes only and does not constitute investment advice.

Written by

Mihail Gaydarov

Founder & Chief Financial Analyst.

The Financier Review.

© 2026 The Financier Review. All rights reserved.

The Financier Review

Works Cited

Akerlof, George A. 1970. "The Market for 'Lemons': Quality Uncertainty and the Market Mechanism." Quarterly Journal of Economics 84, no. 3: 488–500.

Arrow, Kenneth J. 1951. "An Extension of the Basic Theorems of Classical Welfare Economics." In Proceedings of the Second Berkeley Symposium on Mathematical Statistics and Probability, edited by Jerzy Neyman, 507–532. Berkeley: University of California Press.

Berlin, Isaiah. 1969. "Two Concepts of Liberty." In Four Essays on Liberty, 118–172. Oxford: Oxford University Press. Originally delivered as an inaugural lecture, 1958.

Buchanan, James M., and Gordon Tullock. 1962. The Calculus of Consent: Logical Foundations of Constitutional Democracy. Ann Arbor: University of Michigan Press.

Friedman, Milton. 1962. Capitalism and Freedom. Chicago: University of Chicago Press.

Friedman, Milton, and Rose Friedman. 1980. Free to Choose: A Personal Statement. New York: Harcourt Brace Jovanovich.

Grossman, Sanford J., and Joseph E. Stiglitz. 1980. "On the Impossibility of Informationally Efficient Markets." American Economic Review 70, no. 3: 393–408.

Hayek, Friedrich A. 1944. The Road to Serfdom. London: Routledge; Chicago: University of Chicago Press.

The Royal Swedish Academy of Sciences. 2001. The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2001: Markets with Asymmetric Information. Stockholm. Awarded jointly to George A. Akerlof, A. Michael Spence, and Joseph E. Stiglitz "for their analyses of markets with asymmetric information."

Sen, Amartya. 1985. Commodities and Capabilities. Amsterdam: North-Holland.

Sen, Amartya. 1999. Development as Freedom. New York: Alfred A. Knopf.

Stiglitz, Joseph E. 2002. Globalization and Its Discontents. New York: W. W. Norton.

Stiglitz, Joseph E. 2012. The Price of Inequality: How Today's Divided Society Endangers Our Future. New York: W. W. Norton.

Stiglitz, Joseph E. 2024. The Road to Freedom: Economics and the Good Society. New York: W. W. Norton. The text under review.

Stiglitz, Joseph E., and Andrew Weiss. 1981. "Credit Rationing in Markets with Imperfect Information." American Economic Review 71, no. 3: 393–410.

Chicago author–date