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Shiller vs. Fama: Nobel Winning Economists Disagreement Goes To 11: Video Presentation
On Monday I have watched first 3 lectures by Shiller at Yale University, without knowing who Shiller was or that he was a Nobel laureate. His courses are less about economics, and more about communist philosophy. The only reason he softens it, and calls it socialism is because communism is a proven failed doctrine. It is scary.
Reply to @TNK: Having watched it, I think the phenomena of internet echo chambers that allow people to simply borrow talking points and opinions with very little understanding of what the terms mean or require critical thinking turns brains into vestigeal organs.
What scares me is not Schiller but that this echo chamber phenomena protects it's ignorance based dogma by encouraging people to knee-jerk superficially to anything that exposes them to a broad set of ideas to promote critical thinking that might dispel that very basis of ignorance, as a defensive mechanism to sustain itself.
Since you asked...
You completely missed his core thesis of finance as the basis of economic, social and political life where the different systems including capitalism are all expressions of risk management as the goal at the core just "framed" differently for the same purpose. As he explains some work and some don't, some show moral hazards, etc.
This is a good example of why online open universities don't always work very well. Universities are designed to expose fresh minds to information, thoughts and ideas to encourage them to think widely and critically as necessary for human evolution rather than get stuck in static and dogmatic thinking. They also assume a minimum level of preparedness in learning and comprehension capabilities to get the most out of them. This cannot always be assured in an online open university.
He is talking about collective risk management, not about individual risk management.
He is also talking about socialism as a good idea, but without a way to implement it because of the "moral hazard". That "moral hazard" is a defining trait of all humans, it is built in the core of humanity. It is *not a good thing or a bad thing, it's just the way it is. Not to take it in consideration when creating policies, makes the policies bad, not the people they are meant for. To be clear, that "moral hazard" refers to: skipping work when you can, working less if the pay is the same, working as little as possible for as much money as possible.
Then after acknowledging this is an utopia, he talks about finance as a way to take wealth from those that don't need it as much and give it to those that need it the most (maybe that's what you mean by "framing", framing socialism as "finance"). I agree with that as long as it is done voluntarily, also known as philanthropy. Anything else is plain wrong. Not letting people starve, providing shelters or keeping kids from poor families in school, is NOT wealth redistribution. (when I say shelter, that what I mean "a shelter")
He talks about how the wealth difference after retirement is at it's worst, simply because some were able to accumulate more than others. He sees that as a problem, he says that something needs to be done about it. I wonder what people conscious about their retirement think about this, people like members of this forum.
He also predicted the real estate bubble in '08, and advocates global spread of risk. But, to my knowledge, one of the more important reasons for the easy money was exactly the false comfort provided by the spread of risk and the reason the whole economy was dragged down was also because of the risk being spread.
Capitalism is not an expressions of risk management.
Socialism has a predefined goal (risk management? maybe, you can call it that), and to achieve it, false assumptions are made about the human nature, and that is why you have the so called "moral hazard". Capitalism starts with the human nature, without a predefined goal (risk management), each individual has it's own goal, including giving everything to the poor. And each individual might use the risk management to achieve their goals.
Reply to @TNK: You are continuing to try to fit what he is saying into your narrow and flawed conception of capitalism and socialism which treats them as black and white situations. So unable to grasp his main thesis and the source of your broadbrush painting. He isn't painting eirher socialism or capitalism as good as bad but as systems motivated by the same goal of collective risk management.
Collective risk management and the need to share is what creates societies and opportunities for commerce as the means. It is also more efficient that way. You can also have a capitalistic individual system where you are entirely responsible for your own health, protection from others, etc. That doesn't work either. It is more efficient to do this in a collective risk shared fashion within which individuals can differentiate themselves. Note that he introduces the concept of insurance a very capitalistic financial tool as motivated by that collective risk management.
This balance between individual and collective is in a spectrum that can go in one direction or the other but fails when it goes too much in either direction. We have seen failures in both directions.
Because of the collective shared risk management even capitalism comes with a social contract and people often forget that because they are focused so much on self and money and take the social contract for granted or ignore it. His thesis is that this is exactly why finance AS A TOOL gets a bad rap because so many of its practioners forget that.
He is proposing that things that threaten that social contract threaten the system of finance or what you might call capitalism based on it. Extreme inequality is one of them.
Nowhere has he proposed a political system as a solution but has pointed out the origins of policies such as progressive taxation that try to moderate that imbalance. Philantropy his his main suggestion not politically mandated redistribution. You seem to think he is advocating socialism/communism. That is just labeling without the ability to comprehend the ideas behind them or the ability to see beyond black and white as captured in your earlier response.
I don't necessarily agree with his entire thesis but it isn't necessary to do so to understand his thesis. He doesn't believe in EMH either but as you can see in his lectures, he doesn't do a black and white portrayal of that theory either and points out why it merits attention and where it doesnt and why.
The concepts of socialism and capitalism are related the same way and the reality is a mix of both. US isn't purely capitalistic and China isn't purely communistic as things have evolved. One can even make the case that there is no such thing as pure capitalism and pure socialism in reality. What the proponents of ideological capitalism seem to do is selectively pick and choose things from capitalism or socialism as long as it fits them and blame the rest as bad. That is Randian selfish apelike philosophy not the basis of finance as a discipline again two things people confuse.
As we evolve to address problems, it is good to understand why we have what we have first and the motivations for it so we don't lose the plot.
The kind of simplistic black and white thinking you have displayed and the inability to see anything that doesn't fit that thinking which is painted in talking point terms only leads to the kind of blind ideological debates we have in this country.
In any case, I am not here to defend Shiller's thesis against your mis-characterizations or broad brush painting, so I am just going to leave it here saying I beg to differ from your characterizations for reasons stated in more words than I intended or have time for.
Reply to @cman: I know about communism and socialism more than you think. I am not looking to start an argument over political doctrines.
All I said is that I am despise socialism, and I find Shiller socialist. If you think that I am wrong and Shiller is actually not a socialist, we can have a conversation.
Please refrain from using words like "ignorance", "superficially", "borrow talking points", "turns brains into vestigeal organs" it is offensive, especially on the internet, where you don't know who you are talking to.
Jesus. Sounds rather like the days when I was still active in my vocation/career. Lotsa people come to hear, but not listen; carrying with them all of their favorite preconceptions--- by which they miss the point. Utterly.
Toward the very end: "democratization of finance" is THE theme of the course, central to the course. So he says. I guess that works. Sounds just a bit hifalutin'. But he explains: it refers to the fact that more and more people are participating, and financial principles are being applied to a great many more corners and areas of life in general. For example, sub-prime mortgages, by which a great many people were convinced to take on home ownership that they could not afford. Finance as a discipline is spreading out. It could very well be that some of those folks got suckered into an arrangement that chiefly benefited the lender. Or it could be that they honestly didn't plan wisely. I would add that the law should NEVER permit exploitation---as with so many adjustible rate mortgages, baloon payments, etc.
I've never owned a home. I "own" one-seventh of the one I'm in now. (Divided up between mom and dad's kids.) It can be a really good thing. Or it could be an albatross around your neck. I knew a guy who moved from Roswell, NM to Birmingham, AL. He finally shared this thought with some of us one day, long after he had started-up in Birmingham:
"What's the difference between a case of syphilis and a home in Roswell, NM? ANSWER: You can get rid of a case of syphilis."
Reply to @Ted: I am really interested in what he has to say. I was so intrigued by his view, that I wanted to learn more. I had a very pleasant surprise to find the link this morning.
Reply to @Ted: Yes... well, sometimes these things just kind of get by you. Hard to stay on top of everything. By and large, I think that you are pretty darned good at staying on top of stuff, so I wouldn't worry too much about missing just one alleged commie. I don't believe that they are going to do us any serious economic damage any time soon.
What's kind of worrying though, is the Nobel committee picking a guy like that. Maybe they need a hard look-at too. Where's Joe when we need him?
Reply to @Ted: Just make sure you don't link to any articles about Pope Francis (even if it turns out he has blessed index funds). He has been called the same things for pretty much the same reasons... except for the God-less part.
Reply to @Old_Joe: "About missing just one alleged commie", I'm having a séance later tonight imploring the late Sen. Joe McCarthy to help root out any commie's from future links Regards, Ted
Reply to @TNK: I have now watched the first three lectures in this series.
Following is a direct quote from the 3rd course, at 9:47 into the lecture:
"The second theme for this lecture is about framing. By that I mean psychological framing"...
" 'Psychological framing' means the tendency for people to view things in a distorted way depending on how they're presented. If I present things in one frame, then you would react one way. If I present the same thing in another context or background or environment, then you react very differently."
I found the ideas presented by professor Shiller to be well balanced and rounded, giving a wide variety of perspectives and viewpoints on the material discussed, without obvious bias to any particular point of view or social philosophy. Evidently in your "framing" context, the mere mention or consideration of socialism or communism is tantamount to advocacy or espousal of those agendas.
Simply because there are some elements of risk sharing (or management) present in the socialist philosophy does not mean that any economic system using elements of risk sharing is therefore socialist.
If we were to accept your perspective, then evidently anyone utilizing an insurance policy in any form, or accepting a social security payment would automatically be defined as a socialist or communist.
Perhaps you should examine the "framing" into which you seem to place your evaluations of economic theory. There is a good chance that distortions may be occurring.
Love the ancient Yale lecture halls...old black boards, quartersawn oak wall panels and the lecturer's dance between the board and the audience...we use to called it, chalk talk. Most school kid's classrooms today are decked out with white boards and smart boards. They can't appreciate the chalk dust, the lecturers cryptic hand script, the chalk eraser's smearing inefficiency, the occasional exploding chalk and the room awakening, bone chilling, nail scratching chalk noises.
Power Point presentations possess none of these theatrics.
Oh, and the presentation was pretty good too. Thanks.
I stopped watching Shiller after lecture 3, but I found another course in financial theory, by Andrew Lo at MIT. Much better. I've already covered the first 7 courses, and by the end of this week I hope I will cover them all.
The most interesting part of this course is that it was held as the financial crisis of '08-'09 was underway, so half of each lecture is a discussion covering the financial crisis, as it happened.
Comments
Thanks for the link, I will watch it tonight.
This is the course I was talking about:
What scares me is not Schiller but that this echo chamber phenomena protects it's ignorance based dogma by encouraging people to knee-jerk superficially to anything that exposes them to a broad set of ideas to promote critical thinking that might dispel that very basis of ignorance, as a defensive mechanism to sustain itself.
Since you asked...
You completely missed his core thesis of finance as the basis of economic, social and political life where the different systems including capitalism are all expressions of risk management as the goal at the core just "framed" differently for the same purpose. As he explains some work and some don't, some show moral hazards, etc.
This is a good example of why online open universities don't always work very well. Universities are designed to expose fresh minds to information, thoughts and ideas to encourage them to think widely and critically as necessary for human evolution rather than get stuck in static and dogmatic thinking. They also assume a minimum level of preparedness in learning and comprehension capabilities to get the most out of them. This cannot always be assured in an online open university.
He is talking about collective risk management, not about individual risk management.
He is also talking about socialism as a good idea, but without a way to implement it because of the "moral hazard". That "moral hazard" is a defining trait of all humans, it is built in the core of humanity. It is *not a good thing or a bad thing, it's just the way it is. Not to take it in consideration when creating policies, makes the policies bad, not the people they are meant for. To be clear, that "moral hazard" refers to: skipping work when you can, working less if the pay is the same, working as little as possible for as much money as possible.
Then after acknowledging this is an utopia, he talks about finance as a way to take wealth from those that don't need it as much and give it to those that need it the most (maybe that's what you mean by "framing", framing socialism as "finance"). I agree with that as long as it is done voluntarily, also known as philanthropy. Anything else is plain wrong. Not letting people starve, providing shelters or keeping kids from poor families in school, is NOT wealth redistribution. (when I say shelter, that what I mean "a shelter")
He talks about how the wealth difference after retirement is at it's worst, simply because some were able to accumulate more than others. He sees that as a problem, he says that something needs to be done about it. I wonder what people conscious about their retirement think about this, people like members of this forum.
He also predicted the real estate bubble in '08, and advocates global spread of risk. But, to my knowledge, one of the more important reasons for the easy money was exactly the false comfort provided by the spread of risk and the reason the whole economy was dragged down was also because of the risk being spread.
Capitalism is not an expressions of risk management.
Socialism has a predefined goal (risk management? maybe, you can call it that), and to achieve it, false assumptions are made about the human nature, and that is why you have the so called "moral hazard".
Capitalism starts with the human nature, without a predefined goal (risk management), each individual has it's own goal, including giving everything to the poor. And each individual might use the risk management to achieve their goals.
Collective risk management and the need to share is what creates societies and opportunities for commerce as the means. It is also more efficient that way. You can also have a capitalistic individual system where you are entirely responsible for your own health, protection from others, etc. That doesn't work either. It is more efficient to do this in a collective risk shared fashion within which individuals can differentiate themselves. Note that he introduces the concept of insurance a very capitalistic financial tool as motivated by that collective risk management.
This balance between individual and collective is in a spectrum that can go in one direction or the other but fails when it goes too much in either direction. We have seen failures in both directions.
Because of the collective shared risk management even capitalism comes with a social contract and people often forget that because they are focused so much on self and money and take the social contract for granted or ignore it. His thesis is that this is exactly why finance AS A TOOL gets a bad rap because so many of its practioners forget that.
He is proposing that things that threaten that social contract threaten the system of finance or what you might call capitalism based on it. Extreme inequality is one of them.
Nowhere has he proposed a political system as a solution but has pointed out the origins of policies such as progressive taxation that try to moderate that imbalance. Philantropy his his main suggestion not politically mandated redistribution. You seem to think he is advocating socialism/communism. That is just labeling without the ability to comprehend the ideas behind them or the ability to see beyond black and white as captured in your earlier response.
I don't necessarily agree with his entire thesis but it isn't necessary to do so to understand his thesis. He doesn't believe in EMH either but as you can see in his lectures, he doesn't do a black and white portrayal of that theory either and points out why it merits attention and where it doesnt and why.
The concepts of socialism and capitalism are related the same way and the reality is a mix of both. US isn't purely capitalistic and China isn't purely communistic as things have evolved. One can even make the case that there is no such thing as pure capitalism and pure socialism in reality. What the proponents of ideological capitalism seem to do is selectively pick and choose things from capitalism or socialism as long as it fits them and blame the rest as bad. That is Randian selfish apelike philosophy not the basis of finance as a discipline again two things people confuse.
As we evolve to address problems, it is good to understand why we have what we have first and the motivations for it so we don't lose the plot.
The kind of simplistic black and white thinking you have displayed and the inability to see anything that doesn't fit that thinking which is painted in talking point terms only leads to the kind of blind ideological debates we have in this country.
In any case, I am not here to defend Shiller's thesis against your mis-characterizations or broad brush painting, so I am just going to leave it here saying I beg to differ from your characterizations for reasons stated in more words than I intended or have time for.
All I said is that I am despise socialism, and I find Shiller socialist. If you think that I am wrong and Shiller is actually not a socialist, we can have a conversation.
Please refrain from using words like "ignorance", "superficially", "borrow talking points", "turns brains into vestigeal organs" it is offensive, especially on the internet, where you don't know who you are talking to.
Mona
Or maybe Maurice. This sounds right down his alley!
Toward the very end: "democratization of finance" is THE theme of the course, central to the course. So he says. I guess that works. Sounds just a bit hifalutin'. But he explains: it refers to the fact that more and more people are participating, and financial principles are being applied to a great many more corners and areas of life in general. For example, sub-prime mortgages, by which a great many people were convinced to take on home ownership that they could not afford. Finance as a discipline is spreading out. It could very well be that some of those folks got suckered into an arrangement that chiefly benefited the lender. Or it could be that they honestly didn't plan wisely. I would add that the law should NEVER permit exploitation---as with so many adjustible rate mortgages, baloon payments, etc.
I've never owned a home. I "own" one-seventh of the one I'm in now. (Divided up between mom and dad's kids.) It can be a really good thing. Or it could be an albatross around your neck. I knew a guy who moved from Roswell, NM to Birmingham, AL. He finally shared this thought with some of us one day, long after he had started-up in Birmingham:
"What's the difference between a case of syphilis and a home in Roswell, NM? ANSWER: You can get rid of a case of syphilis."
Regards,
Ted
Thank you.
What's kind of worrying though, is the Nobel committee picking a guy like that. Maybe they need a hard look-at too. Where's Joe when we need him?
Regards,
Ted
Following is a direct quote from the 3rd course, at 9:47 into the lecture:
"The second theme for this lecture is about framing. By that I mean psychological framing"...
" 'Psychological framing' means the tendency for people to view things in a distorted way depending on how they're presented. If I present things in one frame, then you would react one way. If I present the same thing in another context or background or environment, then you react very differently."
I found the ideas presented by professor Shiller to be well balanced and rounded, giving a wide variety of perspectives and viewpoints on the material discussed, without obvious bias to any particular point of view or social philosophy. Evidently in your "framing" context, the mere mention or consideration of socialism or communism is tantamount to advocacy or espousal of those agendas.
Simply because there are some elements of risk sharing (or management) present in the socialist philosophy does not mean that any economic system using elements of risk sharing is therefore socialist.
If we were to accept your perspective, then evidently anyone utilizing an insurance policy in any form, or accepting a social security payment would automatically be defined as a socialist or communist.
Perhaps you should examine the "framing" into which you seem to place your evaluations of economic theory. There is a good chance that distortions may be occurring.
Bwahahahahah!
Power Point presentations possess none of these theatrics.
Oh, and the presentation was pretty good too. Thanks.
I stopped watching Shiller after lecture 3, but I found another course in financial theory, by Andrew Lo at MIT. Much better. I've already covered the first 7 courses, and by the end of this week I hope I will cover them all.
The most interesting part of this course is that it was held as the financial crisis of '08-'09 was underway, so half of each lecture is a discussion covering the financial crisis, as it happened.
Enjoy.