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9 Fascinating Insights From Nobel Prize-Winner Robert Shiller


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I <3 economists who are genuinely interested in the workings of history and culture, instead of telling just-so stories about it.

I dig that he's bullish on Lady Gaga:

Well, she fits into a new culture. I just got Sirius satellite radio and what strikes me most is the level of obscenities one can enjoy now. It's a new thing for me. Not exactly my style, but we are going through a cultural transformation, and she seems on the vanguard of it. And so I guess I would be bullish on her. She seems to have the kind of Elvis Presley-type reputation.

I like his take on real estate: 

"Home prices declined for the first half of the 20th century in real [inflation-adjusted] terms. Economists discussed that back then. Why are they going down? The conclusion, if there was any consensus in say 1950, was, of course home prices go down. There's technical progress. They are a manufactured good. Back in 1900, homes were handmade, you know, craftsmen. But now, in 1950, we can get all kinds of power tools and prefab, and they were just better in 1950 than we were in 1900, so of course they will go down.

"From that frame of reference, I think maybe that's exactly what we should expect, too. It's just a manufactured good, and progress is always happening. And on top of that progress, there's the outmoding, the out-of-style factor. So what kind of houses will they be building in 20 years? They may have lots of new amenities. They will be computerized or something in some way that we can't anticipate now. So people won't want these old homes. To me, the idea that buying a home is such a great idea is just wrong. They may very well decline for the next 30 years in real terms."

On why so many experts missed the 2008 financial crisis: 

"Experts have always missed big events like this. If you look at the record of statistical forecasting models, they tend to get to the recession when it's starting to come. A casual observer might start to worry about it. Forecasting it years out, they don't get; in particular, if you look at the Great Depression of the 1930s, nobody forecasted that. Zero. Nobody. Now there were, of course, some guys who were saying the stock market is overpriced and it would come down, but if you look at what they said, did that mean a depression is coming? A decade-long depression? That was never said."

On humans being rational: They're not.

"I actually wrote my dissertation on rational expectations. But I have to say, right from the beginning, I didn't exactly believe in my own theory. It didn't sound right. It didn't have the ring of truth to it to me, and the whole efficient markets hypothesis. So for me, I spent decades in my life wrestling with these issues, because there was the general impression that there was a vast literature supporting sufficient markets. But as years go by, I have learned not to trust vast literatures and science. They can be wrong. I don't know that I appreciated fully the bandwagon effect when I was a young researcher, and I felt kind of intimidated by the great authorities who were saying that science has shown that markets are efficient. I was a little bit too slow to come to a negative opinion on that idea."

On advice to young people: Economic turmoil creates opportunities.

"My standard advice, is be respectful of history. Every time creates its own opportunity, and a time of great economic turmoil is a time of opportunity. You have to think creatively about that. I tell my students, my standard advice, is not to make the mistake of thinking too much in the framework of my life cycle -- I am at this age, it's time for me to take my exams and graduate, then I have to find a spouse, then I have to do such and such. Consider that opportunities come once in a lifetime. Zuckerberg dropped out and found Facebook. That is a good metaphor. I am not advising dropping out, but I am saying life is like that. You have to be alert to opportunities, and the opportunities often take the form of developing your human capital. Okay, I am getting expansive and excited about this advice. I really believe it, and I think that young people don't seem to know this."

I really find this interesting.  I wonder if people were more successful because this type of activity used to be more acceptable.  I fear we've become a culture with schedules and expectations, which dissuades people from choosing opportunity over expectations or accepted schedules. 

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