Tuesday, October 15, 2013

Nobel Prize Winner as Keynesian Crackpot

So what does one of the latest Nobel Prize winners, Robert Shiller, think causes unemployment? Capitalism.

I am not making this up.

In a paper titled,  Austerity and Demoralization, he wrote:
Unemployment is a product of capitalism: people who are no longer needed are simply made redundant. On the traditional family farm, there was no unemployment.
The man doesn't understand simple supply and demand economics, which teaches that any unemployment is transitory (unless government regulations somehow distort the market, e.g. minimum wage laws, unemployment payments). Shiller, further, has no clue as to the phases of the business cycle and why there is a sudden cluster of unemployment in the liquidation phase of the business cycle.

One solution he promotes, though he ultimately dismisses it, is this, which reinforces the idea that he just doesn't get supply and demand economics:
Work-sharing might keep more people marginally attached to their jobs in an economic slump, thereby preserving their self-esteem. Instead of laying off 25% of its workforce in a recession, a company could temporarily reduce workers’ hours from, say, eight per day to six.
Unless, we are in paradise, there is always demand for workers. The central bank caused business cycle downturns are simply a period when work opportunities shift---no need to force employers into misallocating labor via work-share programs.

Shiller ultimately turns to a  Keynesian 101 solution. More government spending:
[W]e need fiscal stimulus – ideally, the debt-friendly stimulus that raises taxes and expenditures equally. The increased tax burden for all who are employed is analogous to the reduced hours in work-sharing.
But, if tax increases are not politically expedient, policymakers should proceed with old-fashioned deficit spending. The important thing is to achieve any fiscal stimulus that boosts job creation and puts the unemployed back to work.
Yes, anything involving government spending---just don't allow the free market to resolve central bank induced episodes of high, but transitory unemployment.

That's the new Nobel prize winner.


  1. You fail to understand. A free market doesn't require them. Thus the reason they oppose it. It has never been about what works. It has always been about what serves their vanity. Psychology determines ideology.

    1. Their vanity or their wallet (from taxpayer dollars) or both.

  2. Finally! Evidence that the Nobel Prize is an BS award. After Obama winning in '09, there was hope that the decision makers for the award would stop scraping at the bottom of the barrel and come back to reality.

    1. the peace prize is awarded a little differently to all the other prizes. I'll extend him the benefit of the doubt as he might say until Austrian economics becomes the norm, these cobbled together Keynesian constructs are what he'll comment on.

    2. The Prizes in Physiology and Medicine and Chemistry are still very good. Basically, the Nobel is only good for the Sciences. I especially loved it when they awarded Frances Crick with it. There are other good awards. Solomon Snyder won his NSF medal for his innovative work with neurotransmitters.

  3. The guy's a complete idiot.

    But to be fair, the list of winners lately does not inspire much confidence. The Nobel Prize is becoming a joke, and worse yet, a badge of shame. I would not be surprised that future recipients will not accept the "honor", as they do not wish their names and reputations soiled by association with such and organization...

  4. Here we see that preserving 'self esteem' is the ultimate end of economics. Wow.

  5. Shiller: Unemployment is a product of capitalism: people who are no longer needed are simply made redundant. On the traditional family farm, there was no unemployment.

    BM: Certainly true, as in an economy freed from the inconveniences brought on by the division of labor, death was often the result of lack of employment.

    Is this what the Nobel Prize has come to? Never mind, the answer to this is clear.

  6. Is corruption a by product of capitalism, too?

    N.Y. Fed Moves to Seal Documents in Ex-Bank Examiner’s Suit

    By Jake Bernstein, ProPublica

    A federal judge in Manhattan is pondering whether to grant the request of the New York Federal Reserve to seal the case brought by former senior bank examiner Carmen Segarra.
    As reported by ProPublica last week, Segarra filed a lawsuit against the New York Fed and three of its employees alleging she had been wrongfully terminated last year after she determined that Goldman Sachs had insufficient conflict-of-interest policies.

    On Friday, the Fed asked for a protective order to seal documents in the case as well as parts of the complaint. In a letter to U.S. District Judge Ronnie Abrams, New York Fed counsel David Gross said the information should be removed from the public docket because it is “Confidential Supervisory Information,” including internal New York Fed emails and materials provided to the Fed by Goldman.

    “These documents show that at the time (Segarra) left the employ of the New York Fed, she purloined property of the Board of Governors of the Federal Reserve System,” Gross wrote, citing Fed rules that prohibit disclosing supervisory information without prior approval of the Fed.

    Gross argues that the Fed’s obligation to keep bank supervisory records secret outweigh the public’s right to know. “The incantation of a 2018 public right to know’ cannot ever be a license to discharged employees that they may violate Federal law simply by filing a complaint in Federal court,” Gross wrote.
    Segarra and her lawyer could not be reached for comment.

    While Abrams considers her decision, Segarra’s lawsuit and appended documents have been removed from Pacer, the online records system for federal courts. The complaint and related documents are available via links in ProPublica’s story and have been published elsewhere online.

    Gross states in his letter that Segarra previously made a $7 million settlement offer. The Fed rejected it.

    The New York Fed has historically been one of the most opaque financial regulators and maintains that it is not subject to the Freedom of Information Act because it is not a public agency.


  7. No unemployment on the 'traditional family farm?' Hmm. http://en.wikipedia.org/wiki/Dust_Bowl

  8. A lot of people are trapped in the prison of the State, and only think in terms of Everything State.

    "What should we get the State to do about this problem?" And "What State program or policy should be increased to solve this or that issue?"

    Anyone who dares to suggest something outside of the State-confined way of thinking is to be ostracized and banished. (e.g. Ron Paul). So Shiller is no different from Krugman, Milton Friedman, et al.

    Sadly, the Nobel Committee that selects these people probably will never employ a Walter Block or a Rothbard.

  9. Maybe it is you who is clueless. Your argument can be disproven through scientific falsification.

  10. I'm always saying that the statists don't have the slightest familiarity with basic Austrian concepts, especially voluntary exchange, economic calculation and Cantillon Effects, nor do they understand the non-ambiguous libertarian NAP.

    Can we all agree that Mr. Shiller is not an exception to that rule?

  11. What do you expect from a group that has been sheltered from having to live in the economy on which they theorize. Isn't this idea that everyone should be able to go to work and slave in the fields "to feel good about themselves", is at the core of leftist thinking? Everyone has to have a job. Never mind if that job is meaningful or not, we just have to have something to keep us busy until we die. I'll pass and go right to the dying part. LOL

    And as far as living under the constant threat of income taxes going higher, I can tell you as a business owner, they make me focus on profitability today at the expense of re-investing for growth for tomorrow. I know that making the same amount of profit today in the future will be much, much harder and profits risked and reinvested may only provide me a bigger business, more headaches and the same or less profits. I'd rather play it safe and take out as much money as I can today and invest it in things that are safer than my business. When I first decided to go with my profits today vs growth tomorrow strategy, I thought I was being pretty original, but as I told other successful business owners, I found out my idea was not very original after all.

  12. "The New York Fed has historically been one of the most opaque financial regulators and maintains that it is not subject to the Freedom of Information Act because it is not a public agency."

    Fair enough. So how about a name change to "Criminal Banker's Slush Fund" to more accurately reflect its purpose and history, and let the Treasury issue it's own currency?

  13. That sums up Hoover's program pretty nicely. Spread the unemployment around and raise taxes to fund public works.