Quick: Name any of the last twenty Nobel Prize winners in economics and what they did to earn it. Paul Krugman is certainly well known. But dollars to donuts, bet you didnaEUR(TM)t know his 2008 prize was awarded for contributions to trade and location theory, not for his role as scourge of the plutocrats.
This year is a little different. While you may not have heard of Eugene Fama or Lars Peter Hansen (whose prizes, incidentally, are well deserved), Robert Shiller is as close to a brand name in economics as you can get. Actually, his name is a brand, as in the S&P/Case-Shiller Home Price Indices. But the publicaEUR(TM)s recognition of the Yale economist has deeper roots. I canaEUR(TM)t think of a contemporary economist whose research is as closely tied to managing the anxieties of everyday life.
Robert Shiller at an MI Forum speaking about pegging long-term public entitlements to economic growth. Click on the image to watch the video.
Shiller, of course, is best known for his efforts to pin down the role of psychology in pricing assets aEUR" in particular its role in creating and deflating asset bubbles, including the one from which we are still recovering. But dearer to my heart are his imaginative, blue-sky proposals for extending the role of social insurance to manage the risks most people consider unmanageable. My own favorite: an income-tax system in which the rates automatically adjust to hold constant the overall degree of income inequality, rather than allowing it to continue to widen. If you want to be blown away by ShilleraEUR(TM)s sheer inventiveness, take a gander at this sample chapter from his remarkable book, The New Financial Order: Risk in the 21st Century.