Now that Bob Shiller has won a Nobel Prize, shared with Gene Fama and Lars Hansen, let’s remind ourselves that his economics is Keynesian. It’s criticized here and here.
Shiller blamed the 2007-2008 financial crash on “animal spirits”, writing “It is now time to keep our eye on the ball and set clear targets to fix a system that broke when our animal spirits got out of bounds.” This is a non-explanation. It does not explain the timing of a bubble and subsequent recession and their linkage and their severity. It doesn’t explain those instances when bubbles do not occur. A doctor who cannot diagnose a patient cannot prescribe proper remedies. For a detailed Austrian diagnosis, see here. Excessive credit creation originating in the banking sector accompanied by a deterioration in loan quality and often stimulated by government policies are key factors that Shiller doesn’t mention.
10:17 am on October 15, 2013
