The Subprime Solution | Robert Shiller | Talks at Google

TL;DR

Robert Shiller discusses his book Subprime Solution and the global financial crisis, highlighting the need for better risk management and behavioral economics in order to prevent and mitigate future economic crises.

Transcript

a pleasure to introduce my old friend robert shiller is the art oaken professor of economics and professor of finance at Yale University Bob received his BA from the University of Michigan in 1967 and his PhD in economics from MIT in 1972 so he's written on financial markets financial innovation behavior economics macroeconomics real estate statist... Read More

Key Insights

• 👁️‍🗨️ Bubbles are complex social phenomena that involve feedback loops, social contagion, and psychological biases.
• ✳️ The current crisis is a result of the failure to effectively manage real estate risk, and there is a need for improved risk management and financial advice for individuals.
• 🫰 Better financial markets that address risks, such as home price indices and futures markets, can help rationalize and manage economic crises.

Questions & Answers

Q: What is the main focus of Shiller's book, Subprime Solution?

The main focus of Shiller's book is to understand how the global financial crisis happened and to propose solutions for preventing and managing such crises in the future.

Q: What are some of the proposals Shiller suggests in his book?

Shiller suggests the creation of a new information infrastructure, better financial markets that deal with risks, and improved retail products to enhance risk management and prevent future economic crises.

Q: How does Shiller view the current economic crisis?

Shiller views the current crisis as more than just a subprime crisis, as it has the potential to lead to another depression. He believes the crisis presents an opportunity to amend the economy and develop a better economic system.

Q: How does Shiller incorporate behavioral economics into his analysis?

Shiller believes that understanding human psychology is essential in comprehending economic events. He emphasizes the need to consider behavioral economics in order to develop a better understanding of market behavior and prevent future crises.

Q: How does Shiller compare the current situation to the Great Depression?

Shiller draws parallels between the current crisis and the Great Depression. He suggests that we learn from history and respond in a way that leads to a better outcome.

Summary & Key Takeaways

• Robert Shiller talks about his book, Subprime Solution, which addresses the global financial crisis and provides solutions for preventing and managing such crises.

• He discusses the current state of the crisis, the need for urgent action, and the various ideas and proposals being presented to deal with it.

• Shiller emphasizes the importance of long-term consequences and the need for a better economic system that aligns with financial theory and behavioral economics.