Economics’ odd couple highlights a Nobel folly

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I would love to be in the audi­ence watch­ing the body lan­guage at this year’s “Nobel” cer­e­mo­ny for eco­nom­ics. Robert Shiller, who is far too polite a per­son to make it obvi­ous, will nonethe­less at least fid­get as he lis­tens to Eugene Fama’s speech, since Fama con­tin­ues to dis­pute that bub­bles in asset prices can even be defined. Shiller, in con­trast, first came to pub­lic promi­nence with his warn­ings in the ear­ly 2000s that the stock and hous­ing mar­kets in the States were dis­play­ing signs of “irra­tional exu­ber­ance”.

Fama came to promi­nence with­in eco­nom­ics – though not in the wider body politic – in the 1970s with his PhD research that argued that asset mar­kets were “effi­cient” not just a first order (get­ting the actu­al val­ues right) but even to a sec­ond order (pick­ing the turn­ing points in val­u­a­tion as well).

How can two such dia­met­ri­cal­ly opposed views receive the Nobel Prize in one year? The equiv­a­lent in physics would be to award the prize to one research team that proved that the Hig­gs Boson exist­ed, and anoth­er that proved it did­n’t.

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About Steve Keen

I am Professor of Economics and Head of Economics, History and Politics at Kingston University London, and a long time critic of conventional economic thought. As well as attacking mainstream thought in Debunking Economics, I am also developing an alternative dynamic approach to economic modelling. The key issue I am tackling here is the prospect for a debt-deflation on the back of the enormous private debts accumulated globally, and our very low rate of inflation.