Economics

Finance and the Good Society

At its core, argues the eminent economist Robert J. Shiller, investment is about the promotion of shared social goals

It goes without question that the reputation of the financial industry has suffered severely in the painful aftermath of the recent financial crisis, brought on as it was by the high-finance vehicles of credit-default swaps. Robert J. Shiller, the Arthur M. Okun Professor of Economics at Yale University, and a fellow at the International Center for Finance at the Yale School of Management, is one of the only experts to have predicted both the stock market bubble of 2000 and the real-estate bubble that led to the subprime mortgage meltdown eight years later. "I wrote this book," he said to open his talk, "because of my sense of the importance and significance of modern finance in our civilization." In this latest book, Finance and the Good Society (just published in German as Märkte für Menschen by Campus Verlag), Shiller doesn't set out an apologia for the sins of finance. Rather, he argues that modern finance, far from being a parasite on society, can be -- and indeed has been -- one of the most powerful and efficient tools available for solving common problems and increasing social well-being. Shiller also provides a wide-ranging historical overview of how finance has contributed to the good of society in a variety of ways through a multitude of economic inventions: insurance, mortgages, savings accounts, and pensions, just to name a few. In this November 14 lecture at the Allianz Forum, Shiller argues that we need more of this kind of financial innovation, not less of it -- and he offers insights into how finance can play a larger role in helping society achieve its broadly shared goals. Ultimately, Shiller suggests that society must again harness finance’s power for the greater good, rather than simply condemning it.

To watch Shiller's complete lecture at the Allianz Forum, please click here.

Robert J. Shiller is one of this year's Allianz Distinguished Visitors at the American Academy in Berlin. He served as vice president of the American Economic Association in 2005 and president of the Eastern Economic Association from 2006 to 2007, and is the recipient of numerous awards for economic study, including the Deutsche Bank Prize in Financial Economics in 2009 and the European Financial Management Research Award in 2011. The same year, Bloomberg Markets named Shiller one of the 50 most influential people in global finance. Shiller is a regular contributor to both Project Syndicate and The New York Times and has authored a wide range of books, including Subprime Solution: How the Global Financial Crisis Happened and What to Do about It (Princeton University Press, 2008), Animal Spirits: How Human Psychology Drives the Economy and Why It Matters for Global Capitalism (with George A. Akerlof, Princeton University Press, 2009 / Campus Verlag 2009), and Reforming U.S. Financial Markets: Reflections before and beyond Dodd-Frank (with Randall Kroszner MIT Press, 2011). His repeat-sales home price indices, originally developed with Karl E. Case, are widely recognized as the S&Ps/Case-Shiller Home Price Indices and used, among others, by the Chicago Mercantile Exchange, to maintain futures markets.