Sunday, 5 January 2014

Of bubbles and conventional wisdom- News and views for Sunday 5 January

News and views noted along the way. Some links to things I’ve found interesting today.
Paul Solman: Were you uncomfortable? You, in the ’90s, were talking about irrational exuberance in the stock market. In the 2000s you were talking about a housing bubble. Were you uncomfortable when you were doing that?
Bob Shiller: Yes, yeah. Not only was I acting unpatriotic, but I was also working against a sense of self-esteem that we have that we’re the most capitalist country in the world, and we have a system that works better and better… an amazing system. To say that, well, there are others who did that, but to say that the system is flawed and that it’s open to psychological swings is just… it was a risky professional strategy. There were people who did it, like John Kenneth Galbraith in 1954 wrote a book called “1929, The Great Crash,” and that was a wonderful book, but it made the leaders of this country look a little foolish. I think he was very unpopular for that. But he had a sort of following. I think he was following his conscience.
Paul Solman: Well, he liked being contrarian.
Bob Shiller: I think I like being contrarian, too. But I like the truth and I’m not going to do it just to be contrarian. The word conventional wisdom, by the way, was coined by Galbraith and it refers to his frustration when so many high placed people were saying the same nonsense. They would say it because it’s the thing to say.
Paul Solman: The same “nonsense” meaning?
Bob Shiller: Well like, back in the ’50s [when] the stock market was booming, they would say patriotic things — “Own a share of America” — I think that was it, do I have that exactly right? It’s a New York Stock Exchange slogan. “Buy your share in America.” And so it was a triumph of our system that the stock market was going up.
A quote for the day.
When you apply for a job at 50 people laugh at you. When you apply for a job at 65 people just look at you like you are crazy.
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