Robert Shiller of Yale University is #48 on Foreign Policy’s list of the 100 Top Global Thinkers of 2010. He tells Chrystia that his big idea is that “finance can serve humanity, especially if it democratizes.” In fact, Shiller argues that the spread of finance is responsible for the super-cycle of economic growth that the world has enjoyed over the past half-century. He disputes the charge that finance is mainly beneficial to a small cabal of bankers in the world’s financial capitals.
Over half the population of the United States uses mutual funds, retirement plans and complex mortgage contracts to manage risk. And, risk-management techniques could be expanded to include more of the uncertainties of middle-class life, he says.
Professor Shiller has two big ideas in the pipeline: a book that will address the popular prejudices against finance and a book to be co-written with George Akerlof on the future of international financial regulation.
Here’s Foreign Policy’s take on what makes him a top global thinker:
If there is one financial indicator that has defined America’s current economic malaise, it’s home sales. And if there is a man who has defined that indicator — literally — it’s Robert Shiller. As the co-creator of the go-to reference on the subject, the S&P/Case-Shiller Index, the economist has become the world’s most important housing guru. A decade after famously warning that the dot-com boom was just so much “irrational exuberance,” he was among the first to predict that the housing bubble would pop, and he has spent the last two years saying that we’re not in the clear yet.
Shiller’s unconventional brand of economics — he cites his wife, a psychologist, as a major influence on his thinking — has left him skeptical of optimistic recovery scenarios drawn from past downturns such as the 1990s Asian crash. As he put it in September, “Hopes that the aftermath of the current crisis will turn out better are still in the category of thoughts, theories, and dreams, not science.”