Nobel economics laureate talks about 'good society'

So spoke one of the recipients of this year’s Nobel Prize in Economics, Robert Shiller, during a lecture at KTH Royal Institute of Technology.

The hall was packed to overflowing as the program began with traditional holiday songs sung by the student choir, Osqstämman. Then, the President of KTH welcomed the Nobel laureate.

“Many of us are curious as to whether we have a housing bubble in Sweden and whether we should buy or sell our home,” joked Peter Gudmundson.

Shiller did not want to talk bubbles; he had done enough of that during the week. Instead, he wanted to discuss the future based on his book, Finance and the Good Society.

“How can we create a good future for the society – not going-to-church-on-Sundays good – but more real good that brings forward the best?” he asked, noting that these thoughts were not what he was awarded the Nobel Prize for. But still.

None of the more than 500 people listening seemed to mind. Shiller developed his argument for democratizing the financial market so as to reach out to more of society, and not only rich men. Another thing that must be remedied is how to deal with financial crises, including the human toll.

“Humanity is not 100 percent rational. And economic models do not explain everything,” he said. He likened a volatile market to a highway where everyone drives too fast. No one can halt or slow down, because all the others are accelerating.

He also said that building a functioning finance is a kind of engineering where, for example, both lending institutions and insurance companies can be developed to create a good society. Online crowdfunding is another method that Shiller advocates, in order to reduce dependence on banks and venture capitalists.

“A kind of finance Wikipedia, wouldn’t that be good? Of course, people in the good society become really rich - only they are giving away money then.”

Shiller also talked about charity and that it is important to encourage through tax breaks. He also stressed that the area between profit and non-profit activities should be developed.

These measures would help facilitate the required atmosphere of generosity to create the good society, according to Shiller. They also are needed to address inequalities that occur when advanced technologies eliminate jobs around the world. Something that Shiller sees as one of the main problems to solve for the future.

Jill Klackenberg

This year's Nobel Economics prize

Robert Shiller is Professor of Economics at Yale University, and he shared the economics prize with Lars Peter Hansen and Eugene Fama for their "empirical studies of asset prices."

Shiller's research concerns including financial economics, financial innovation and Real Estate as well as methods for valuing assets. His book, Finance and the Good Society, was published in 2008.