Our guest this week is Nobel Laureate Robert Shiller, professor of economics at Yale, and author of a new book, Narrative Economics: How Stories Go Viral and Drive Major Economic Events.
Shiller has created numerous market and economic measures that have become widely adopted, including the CAPE ratio, and the Case-Shiller Housing Index. His 1981 paper, “Do Stock Prices Move Too Much to Be Justified by Subsequent Changes in Dividends?” was an early exploration of behavioral finance, and the concept that markets are not perfectly efficient and individuals are driven more by emotion than rationality. He has been the co-organizer of NBER workshops on behavioral finance with Richard Thaler since 1991. Shiller won the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2013 for his empirical analysis of asset prices.
Readers can take Shiller’s course on Financial Markets (free) on Coursera.
Shiller’s newest book looks at how narratives influence our beliefs, and that extends to affecting markets and economic events. Visual issues matter a great deal for stories, as do our own sense of identity. He mentions that once Unions were blamed for rising Inflation, it led to a general diffusing of the power of unions.
He explains how Google Trends can be used not only to predict influenza epidemics, but also economic changes. Its not so much that we can talk ourselves into a recession, as we can identify when the public’s economic concerns can be identified before a recession officially starts.
His favorite books are here; A transcript of our conversation is available here.
You can stream/download the full conversation, including the podcast extras on Apple iTunes, Overcast, Spotify, Google Podcasts, Bloomberg, and Stitcher. All of our earlier podcasts on your favorite pod hosts can be found here.
Next week, we speak with Binyamin Appelbaum, lead business and economics writer for the New York Times’ Editorial Board, and author of The Economists’ Hour: False Prophets, Free Markets, and the Fracture of Society.
Robert Shiller’s Favorite Books
The Autobiography of Benjamin Franklin by Benjamin Franklin
The Life of Samuel Johnson by James Boswell
Thinking, Fast and Slow by Daniel Kahneman
The Painted Word by Tom Wolfe
The Great Crash 1929 by John Kenneth Galbraith
The great recession, with a postscript on stagflation by Otto Eckstein
Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets by Nassim Nicholas Taleb
Littell’s Living Age by Eliakim Littell (free online versions from Google Books or Wikisource)
Robert Shiller’s Authored Books
Narrative Economics: How Stories Go Viral and Drive Major Economic Events by Robert Shiller
Irrational Exuberance by Robert Shiller
Finance and the Good Society by Robert Shiller
The Subprime Solution: How Today’s Global Financial Crisis Happened, and What to Do About It by Robert Shiller
The New Financial Order: Risk in the 21st Century by Robert Shiller
Macro Markets: Creating Institutions for Managing Society’s Largest Economic Risks by Robert Shiller
Market Volatility by Robert Shiller
Books Barry Mentioned
Hit Makers: How to Succeed in an Age of Distraction by Derek Thompson