Professor Robert Shiller presents the annual Irene and Bernard L. Schwartz lecture titled Animal Spirits: How Human Psychology Drives the Economy, and Why it Matters for Global Capitalism.
The lecture will be based on Professor Shiller's upcoming book of the same title, which is co-authored with George Akerlof, Koshland Professor of Economics at University of California, Berkeley and Nobel Laureate.
A panel discussion and question and answer session follows the lecture and features: Brad DeLong, professor of Economics at the University of California, Berkeley; Teresa Ghilarducci, Irene and Bernard L. Schwartz Professor of Economic Policy Analysis at The New School for Social Research; and Jeff Madrick, senior fellow, SCEPA, The New School for Social Research.
Bio
Brad DeLong
Brad DeLong is a professor in the Department of Economics at U.C. Berkeley; chair of the Berkeley International and Area Studies Political Economy major; a research associate at the National Bureau of Economic Research; and a visiting scholar at the Federal Reserve Bank of San Francisco. From 1993 to 1995 he worked for the U.S. Treasury as a deputy assistant secretary for economic policy.
Teresa Ghilarducci
After spending 25 years at the University of Notre Dame as a professor of economics and 10 years as director of the Higgins Labor Research Center at the University, Teresa Ghilarducci is now the Irene and Bernard L. Schwartz Professor of Economic Policy Analysis at the New School for Social Research.
Ghilarducci's new book, When I'm Sixty-four: The Plot Against Pensions and the Plan to Save Them, published in May 2008 by Princeton University Press, investigates the effect of pension losses on older Americans. Her book Labor's Capital: The Economics and Politics of Employer Pensions, MIT Press, won an Association of American Publishers award in 1992. She co-authored Portable Pension Plans for Casual Labor Markets in 1995.
Ghilarducci publishes in referred journals and testifies frequently before the US Congress. She is the WURF fellow at the Labor and Worklife Program at Harvard Law School and serves as a public trustee for the Health Care VEBAs for UAW Retirees of General Motors and for the USW retirees for Goodyear, and she served on the Pension Benefit Guaranty Corporation's Advisory Board from 1996-2001.
Ghilarduccis was also on the Board of Trustees of the State of Indiana Public Employees' Retirement Fund from 1996-2002. Her research has been funded by the Alfred P. Sloan Foundation, US Department of Labor, the Ford Foundation, and the Retirement Research Foundation.
Jeff Madrick
JEFF MADRICK is editor of Challenge Magazine, visiting professor of humanities at The Cooper Union, and director of policy research at the Schwartz Center for Economic Policy Analysis, The New School. He is a regular contributor to The New York Review of Books, and a former economics columnist for The New York Times.
He is the author of several books, including Taking America (Bantam), and The End of Affluence (Random House), both of which were New York Times Notable Books of the Year. Taking America was also chosen by Business Week as one of the ten best books of the year. His most recent book is Why Economies Grow (Basic Books).
He has served as a policy consultant for Sen. Edward M. Kennedy, and other U.S. legislators. He has written for many other publications, including The Washington Post, The Los Angeles Times, Institutional Investor, The Nation, American Prospect, The Boston Globe, Newsday, and the business, op-ed, and magazine sections of The New York Times. He has appeared on Charlie Rose, The Lehrer News Hour, Now With Bill Moyers, Frontline,, CNN, CNBC, CBS, and NPR. He was formerly finance editor of Business Week Magazine and an NBC News reporter and commentator.
His awards include an Emmy and a Page One Award. He was educated at New York University and Harvard University, and was a Shorenstein Fellow at Harvard.
Robert J. Shiller
Robert J. Shiller is the Arthur M. Okun Professor of Economics, and Cowles Foundation for Research in Economics at Yale University. He is also professor of Finance and Fellow at the International Center for Finance at Yale School of Management. He has written about financial markets, financial innovation, behavioral economics, macroeconomics, real estate, and statistical methods, as well as on public attitudes, opinions, and moral judgments regarding markets. In 2010, he was named by Foreign Policy magazine to its list of top global thinkers.
Social science that analyzes and describes the consequences of choices made concerning scarce productive resources. Economics is the study of how individuals and societies choose to employ those resources: what goods and services will be produced, how they will be produced, and how they will be distributed among the members of society. Economics is customarily divided into microeconomics and macroeconomics. Of major concern to macroeconomists are the rate of economic growth, the inflation rate, and the rate of unemployment. Specialized areas of economic investigation attempt to answer questions on a variety of economic activity; they include agricultural economics, economic development, economic history, environmental economics, industrial organization, international trade, labour economics, money supply and banking, public finance, urban economics, and welfare economics. Specialists in mathematical economics and econometrics provide tools used by all economists. The areas of investigation in economics overlap with many other disciplines, notably history, mathematics, political science, and sociology.
Well, they are looking at the real world. At least these economists are. After the Great Depression, that's exactly what happened: The U.S. came to be the utmost power in manufacturing around the world, and the richest country --as it still stands today (in a way). During the 80's that people started learning finance; exactly according to Shiller, they 'forgot' about the crisis and went to create a new one!
They don't address the basic problem: During the bubbles there was a tremendous amount of malinvestments and those need to be corrected. There are too many people learning MBAs, working in real estate, working in sales and too few study engineering, nursing. Why? Because during the bubbles people got false signals that the former group of professions were the way to get rich quick. The way to fix it is creating unemployment and force these people to do something useful that contribute to society. The government programs aim to stop this.
These economist all look at graphs and aggregate numbers and not at what is happening in the real world.
I think the point that Schiller is making is that modern economic theory assumes that people always act rationally. In fact, we don't always act rationally because we are humans, not computers. Sometimes emotions like exuberance or fear (or other "animalistic" emotions) affect the decision-making process. Economic models don't account for this fact, and are therefore too simple to rely without discretion.
Behavioral Economics and systemic thinking has become a more pervasive topic, but the prevailing economic theory has been the idea that people will respond solely to incentives and disincentives.
Interesting. I didn't realize the prevailing idea in economics is that it's unaffected by human behavior. Shiller's arguments went way the hell over my head, but DeLong made quite a good case. Yes, it's the market's goal to allocate capital, but it does it so by influencing people's investment habits. And, in a perfect world, people would invest where the market wants them too. But guess what? The market wants investing now, and nobody's doing it. Why? Because they're scared. Score one for psychology.
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