Robert Shiller: A Picture Tells a Thousand Words

Conference on Monetary Mechanisms in Open Economies, Helskinki, 1975. Foreground row (left to right): Shiller, Friedman, Frenkel, and Phelps Photograph courtesy John Y. Campbell/ (c) 2004 Cambridge University Press

… It seemed to me that economists often seemed to live in a rarefied world. Often, there are very simple explanations of why people do what they do, and economists ignore them. … I didn’t have a complete affection for this rational expectations theory. It was something to work on at that time. I didn’t fully believe that people could be so calculating in their expectations.
Robert J. Shiller, in an interview by John Y. Campbell (PDF) Macroeconomic Dynamics, 2004, as presented by the Cowles Foundation for Research in Economics, Yale University

Robert Shiller has won the Nobel Prize in Economics, with Eugene F. Fama and Lars Peter Hansen. Their prize is the most accessible award in decades. Their work directly affects your future.

Their thinking, deep philosophical and mathematical thinking, questions how and what we “invest” in. They and others deserving question how we become not a burden upon our children. As we are learning, our retirement system—our investing—is a failure.

A terrific overview of Fama, Hansen, and Shiller is found in Justin Fox’s Harvard Business Review blog post.

Even better, dive into Fox’s outrageously competent The Myth of the Rational Market: A History of Risk, Reward, and Delusion on Wall Street.

Better yet, have nearby the 16 chapters of Paul A. Samuelson and William A. Barnett’s Inside the Economist’s Mind: Conversations with Eminent Economists. Chapter 11 is on Shiller.

To be direct, Shiller, with his student John Campbell, frame how we got here. Bob Shiller is too young to be a post-World War II giant. He followed in the Cambridge footsteps of Samuelson, Robert Solow, and his mentor, Franco Modigliani.

He then, through first-order economics and simple curiosity, helped us toward our exuberant modernity. Shiller has been thinking for decades about the bad and good of our society.

Campbell has a photograph in his Macroeconomic Dynamics. It is on page 653. I consider it to be a jewel, the capturing of a moment. From Smith to Marx to Keynes to the fervor of the 1950s and ’60s, there was change in the air of 1975.

Here, at the Conference on Monetary Mechanisms in Open Economies in Helsinki, sit the assembled aged and near-aged. Karl Brunner, Modigliani, Ned Phelps, Benjamin Friedman, Jacob Frenkel: all casual, relaxed in full “conference” mode.

In the front row, as in an Econ 101 class, sits upright Bob Shiller: young, formal in shirt and tie, and taking notes.

The photograph tells an irrational amount of words.

Robert Shiller has won the Nobel Prize in Economics for 2013—and for those mentors of another time.