Watch this video of Robert Shiller from a few years ago.
Source here. Pointer from Tyler Cowen.
Shiller’s body language, speaking style, and content suggest discomfort. He is like a kid (and of course he has very boyish looks for someone in his 60s) talking about why he never gets picked by the other kids to play in team games at recess.
And yet, when I showed the video to my students, one of them reacted by saying that Shiller seemed arrogant. And I think there is something to that, as well.
Contrast the confidence of Stanley Fischer, the voice of authority. Fischer knows that when he speaks, respectable macroeconomists stand with him. Over the years, he had make-or-break power over the careers of most of them.
Shiller has a different type of confidence. His is the confidence of the boy who sees the naked emperor. He has found what he is pretty sure are fundamental flaws with the mainstream world view.
So, there is establishment confidence. That is the confidence that you have the establishment with you, agreeing with your world view and respecting your power. Then there is outsider confidence, the confidence that you have in your ideas and a belief that it is better to be a low-status person with good ideas than a high-status person with mainstream ideas that are not as good.
It is easy for me to see Timothy Geithner not wanting to have Shiller in the room. Geithner has establishment confidence, which is threatened by outsider confidence.
Having said that, I myself am not heavily influenced by Shiller’s ideas. In finance, I like Frydman and Goldberg’s critique of rational-expectations modeling. In particular, different people are bound to have different information and different models. In macro, I am inclined toward a Schumpeterian story of difficult adjustment to changes in productivity in different sectors. However, if you want tell an aggregate-demand story, then I am with Shiller that “animal spirits” sounds like a better place to start than the Euler equation of a single representative consumer/worker.
I find it hard to believe that Robert Shiller would be ostracized from the economics and finance academic community. He is a full professor at Yale, his work has been published many times in the top journals and also (for a different audience) by top university presses, and of course there is the Nobel prize.
Then again, I have been told that Richard Thaler at Chicago is ostracized from the finance group, despite his impressive CV and not-unreasonable shot at a Nobel prize (lower odds now that Shiller has gotten his).