Shiller's 'no shill' solution

About the author

Tony Curzon Price was Editor-in-Chief of openDemocracy from 2007 to 2012, where he is now contributing editor and technical director. He blogs at tony.curzon.com

Robert Shiller was at London's ippr talking about the subprime crisis and another prescient book of his:

Of many fascinating things he said, three stood out:

1. that there should be publicly funded financial advisors who are not also selling products. As he said, only the rich get real advice about financial products. Imagine, he said, a world in which we had only drugs companies and no doctors ... This is what we have when it comes to financial health.

This is an application of Lessig's "no shill" principle---this times proposed by Shiller about our shillings:

 

2. a New Deal is not a return to the Old "New Deal": we have to realise that economic policy, especially in such extreme circumstances, works on animal spirits. And the new spirit that the New Deal ushered in cannot be ushered in by copying the policies. We need to implement policies -- including reflationary policies -- that make sense in the context of the next 100 years, not in the context of the next 100 days. Thinking about 100 days will not change the animal spirits ... indeed quite the opposite.

3. (... and this followed from a question I asked him prompted by "2"): Economists have to become more like Keynes: an understanding of animal spirits requires an understadning of sociology, history, psychology, and responsible economists are one who will integrate all of these in policy pronouncements. He said something like: "I did not become a theoretical physicist. Many economists wish they were theoretical physicists. I admire theoretical physicists. But our responsibility is to understand the wider world." Bloomberg apparently video'd the event. I'll post a link to it if I find it on the free side of their web site.

Since Shiller seems so good at timing his books with great prescience, I think it is important to know that he has a book with George Akerlof on Animal Spirits coming out in March that will be talking about sociology in economics. Now, we just need to work out why that will have been so prescient...