‘It’s 2005 all over again’: Probably best we listen to this guy

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‘It’s 2005 all over again’: Probably best we listen to this guy

Economist Robert Shiller, the Nobel Prize winner, sounds a chilling warning about the US housing market

Tom Rees

Economist Robert Shiller thinks his peers have missed something big. Most experts in his sphere believe the cogs of the economy are turned by policies and mathematics. But Nobel Prize-winning Shiller has always sought out the human side of the so-called dismal science.

He instead sees stories, beliefs and, most dangerously, irrational greed as key drivers of the global economy, wedding maths and psychology together. Economists, he argues, don’t “talk about things that people really care about that are driving them to behave differently. They need to listen to what these other disciplines have to say and start talking about an important driver of economic change, which is narrative.”

He says narratives and confidence can underpin boom times but also inflate asset price bubbles until they burst and bring down the economy with it...

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