The Economist Who Wants to Ditch Math
Nobel laureate Robert Shiller argues that gossip, half-baked philosophy, and fake news drive economics — not only numbers. His peers aren’t exactly thrilled.
Two decades ago, before the dotcom bust, economist Robert Shiller told peers that the stock market was vastly overpriced. A few years later, before the financial crash, he warned that housing was fated for a massive correction, too. Now the rabble-rousing, Nobel laureate professor has a new message for them:
Put down your calculators. It’s time to listen.
And what will his fellow economists hear when they do? An epidemic of chatter, says Shiller — stories told and retold at home, on social media, at workplaces, and just about everywhere else people gather. The skinny may be about new money pouring into Bitcoin, or the Chinese trade deal really about to happen this time. Before long, collective mobs of people will be moving their money around, sending the Dow to new highs.
In short, after four decades of a religious-like fixation with mathematics, mainstream economists may learn that the gossip, whispers, half-baked philosophy and “news tips” passed human to human since cave days drive economics. True, fake, it hasn’t mattered — such talk has spread and commanded surprising influence over economies. Shiller regards this as no small matter. In a new book, he argues for a profession-wide, decades-long study of viral stories as a path to much-needed improvement in utterly flawed economic forecasting.
“The standard statistical analyses are no longer valid. They assume that we know the probabilities with which everything will occur. In reality, we are almost never in that position.”
To say that the field has been cool to Shiller’s latest big idea is to insult the walk-in freezer. For almost three years, Shiller has laid out his thinking in speeches and papers, including to some 900 of the world’s leading economists at the 2017 meeting of the American Economic Association (of which he was president at the time). At such speeches, there has been polite applause…