Understanding Economic Bubbles: Insights from Fama & Shiller | Microeconomics | Trường Đại học Quốc tế, Đại học Quốc gia Thành phố Hồ Chí Minh
On today'sshow, we talk to two of the three guys who won this year's Nobel Memorial Prize in economics: Eugene Fama and Robert Shiller. As we and everybody else pointed out when the award was announced, these two are a bit of an odd couple. Shiller is probably the most famous analyst of bubbles; Fama is probably the most famous skep. Tài liệu được sưu tầm và soạn thảo dưới dạng file PDF để gửi tới các bạn cùng tham khảo, ôn tập đầy đủ kiến thức, chuẩn bị cho các buổi học thật tốt. Mời bạn đọc đón xem!
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Planey Money NPR What's A Bubble?
On today's show, we talk to two of the three guys who won this year's Nobel
Memorial Prize in economics: Eugene Fama and Robert Shiller.
As we and everybody else pointed out when the award was announced,
these two are a bit of an odd couple. Shiller is probably the most famous
analyst of bubbles; Fama is probably the most famous skeptic of bubbles.
Here are a few quotes from our conversations with Fama and Shiller. Fama:
The word "bubble" drives me nuts, frankly, because I don't think there's
anything in the statistical evidence that says anybody can reliably predict
when prices go down. So if you interpret the word "bubble" to mean I
can predict when prices are going to go down, you can't do it. ..
I believe markets work. And if markets work those things shouldn't be
predictable. If I can predict that housing prices will go down, if the
market's working properly, they should go down now ... If the market's
working properly the information should be in the prices.
In other words, Fama says, if stock prices get too high, then people should
sell stocks, and the price should fall. Presto, no bubble.
But Shiller himself has predicted the two great bubbles of our time. As he told us:
You can have a fairly high degree of confidence. That's what I felt in the
stock market in late 1990s. I wrote the first edition of my book,
"Irrational Exuberance," then, because... and I was rushing to get it out.
I told my publisher, Princeton, "Please get this out! Because I want this
book out before the crash, not after." And then again I felt that in the 2000s with housing bubble. Fama:
So, what happens each time is the media goes in and finds somebody
who predicted it. That person get's anointed. You don't go back and
look at past predictions and see is this just luck.
So, was Shiller one of those people who was anointed by the media? 1 Planey Money NPR Oh yes. ...
What would prove it to you that there were bubbles? Empirical evidence. Such as?
Well, that you could show me that you can predict when these things turn in some reliable way.
So what is your challenge to Robert Shiller? He should predict the next bubble?
[laugh] Right. Well, I don't know. Not just the next one. You know,
statistically reliability means more than two, really. The next 10?
Well, the next 10 would be really convincing. Yeah then I'd be convinced.
We asked Shiller what he thought about this:
Fama says he would believe there were bubbles if you could predict ten of them in a row.
Yeah, but I don't live that long. You know, these big bubbles are rare
events that play out over years. They can go a long time.
If you lived long enough, do you think you could make good on Gene
Fama's request that you predict 10 bubbles in a row? If I lived long enough, yeah. You do think you could?
Uh. I think so. Yeah. I'm not the most self confident person.
_____________________________________________________________ DAVID KESTENBAUM, HOST:
One of the consequences of the time difference between Sweden and the
United States is that when someone in the U.S. wins the Nobel Prize, it's
not like they're sitting at their desk in the office. The phone call comes really
early in the morning, which is why most stories about the Nobel Prize start with something like this. 2 Planey Money NPR
ROBERT SHILLER: I was just getting out of the shower when it (laughter)
went and rang. So I wasn't properly dressed to receive the news, but there
was nobody around. My wife was sleeping. ROBERT SMITH, HOST:
This is Robert Shiller, an economist at Yale who received this year's Nobel
Memorial Prize for Economics. He was told that he won for his research on
the stock market. Then he was asked if he would accept the Nobel Prize.
He said yes. And he was told one other thing. He would be sharing the prize
with a guy who also studies the stock market, Eugene Fama at the University of Chicago.
KESTENBAUM: We asked Fama the other question reporters always ask. Were you surprised to win? EUGENE FAMA: Of course.
SMITH: What do you mean of course? I mean, people talk about names. It's always out there.
FAMA: Right, but the problem is there's so many names that the probability
that any one gets it is not that high in any particular year. Maybe the
cumulative probability of a (unintelligible) is high. But...
KESTENBAUM: That's an awesomely quantitative way to look at it.
FAMA: (Laughter) Well, that's what I do after all (laughter).
SMITH: Eugene Fama and Robert Shiller are an unlikely pair from different
universities and, really, from different universes. When people heard their
names announced together - that these two guys won the Nobel Prize -
people said, really? Like, those guys? Shiller - he was just fresh out the
shower. He had a similar reaction when he heard he was sharing the prize with Fama.
SHILLER: That was a complete surprise. I hadn't thought that that would
happen. He and I seem to have very different views. It's like we're different
religions, you know? It's that certain assumptions - basic assumptions are different.
SMITH: Shiller and Fama disagree about the most fundamental thing you
can imagine. Fama looks at our economy and sees an orderly, rational place 3 Planey Money NPR
where people are basically logical. And the market does everything for a good reason.
KESTENBAUM: Shiller, on the other hand, looks at our economy. And he
finds the opposite, bubbles, mass delusions and things that he can only
describe in terms of mental illness.
(SOUNDBITE OF SONG, "BUBBLES")
KESTENBAUM: Hello, and welcome to PLANET MONEY. I'm David Kestenbaum.
SMITH: And I'm Robert Smith. Today we touch on some pretty weighty
philosophical questions. Are we ruled by our heads or by our hearts? At our
core, are we logical creatures responding rationally to rewards and
punishments, or are we dreamers falling in love and making some terrible mistakes with money?
KESTENBAUM: Will you put it in the more fun way instead?
SMITH: Yeah. It's essentially the old Star Trek question. Are you a Captain Kirk, or are you a Spock?
KESTENBAUM: (Laughter) And this is a real economic question because,
you know, when things go wrong, when we have recessions and financial
crises, we need to know. Are the markets logical? Can they save themselves,
or do they go crazy, in which case, we, the government, the taxpayers - we
would need to go in and save them? The answer depends on who you think is right, Fama or Shiller.
(SOUNDBITE OF SONG, "BUBBLES")
BIFFY CLYRO: (Singing) You are creating all the bubbles at night. I'm
chasing around and trying to pop them all the time.
SMITH: OK. So how different are these guys? - Eugene Fama and Robert
Shiller. Let's take this one term, a word that everyone throws around. It's in
the news all the time. The word is bubble.
KESTENBAUM: You know, bubble - like housing bubble, stock-market
bubble, dot-com bubble - you know, when the price of something goes crazy
high, well above what it's obviously worth, and then comes crashing
catastrophically down. Most famously, there was the tulip bubble of the
1600s in Holland - people paying what today would be thousands of dollars 4 Planey Money NPR
for things that they were just going to go bury in the ground. You know, bubbles.
FAMA: The word bubble drives me nuts, frankly.
SMITH: This is Eugene Fama, the man who believes the world is rational.
And if you believe in a rational world, then the whole concept of bubbles
doesn't make any sense because the price is always right. It reflects the
collective wisdom of everyone in the market. Yes, prices go up - sometimes
way up. And sometimes they come down quickly. They crash. But it doesn't
mean the prices were wrong. It doesn't mean the markets went crazy.
KESTENBAUM: Fama's view is that prices change when people get new
information. In fact, that's part of what he won the Nobel Prize for, showing
that stock prices quickly react to news. That's why the word bubble drives
him crazy. Fama says no one even has a good definition of this bubble thing.
SHILLER: Yes. And here's where I differ from Fama in some fundamental ways.
SMITH: It's Robert Shiller, the one from Yale.
SHILLER: He says he doesn't even know what a bubble is and thinks that
no one has properly defined it. Actually, see, here's what - I really respect
the man. I think that, in a way, he's right. It wasn't really carefully defined.
So I wrote my own definition of it in the second edition of my book "Irrational Exuberance." KESTENBAUM: Let's hear it.
SHILLER: Well, I give kind of a long-winded definition. KESTENBAUM: (Laughter).
SHILLER: It's like a - see, it's like a mental illness. If you look at the
American Psychiatric Association's Diagnostic and Statistical Manual, which
defines mental illnesses, the mental illness definitions consist of a checklist of symptoms.
SMITH: OK. So let's go through this Shiller checklist of symptoms you may
be experiencing if you are living through a bubble. And we'll see how it
applies to the most recent housing boom. OK. Bubble - first of all, he says,
a bubble is a time of rapidly increasing prices. 5 Planey Money NPR
KESTENBAUM: Check. Home prices in Miami basically doubled in a few years.
SMITH: OK. He says people tell each other stories that purport to justify the reasons for the bubble.
KESTENBAUM: Check. I have a book at my desk from this very time
period. The title is "Why The Real Estate Boom Will Not Bust."
SMITH: (Laughter) Best-seller. People tell each other stories about how
much money they're making in a bubble.
KESTENBAUM: Check. The subtitle of the book is "And How You Can Profit From It."
SMITH: And, of course, there is the time when people feel envy and regret
that they too did not participate in said bubble. KESTENBAUM: Check. I did.
SMITH: Shiller says it's like a social epidemic.
SHILLER: There's an impulse to buy into it because of the swirl of emotions
that one feels and it trumps your common sense. Oh, I would add one more.
First of all, the news media are involved. (LAUGHTER)
KESTENBAUM: Thanks a lot for that.
SHILLER: Well, there were no bubbles before there were news media. The
first famous bubble was the tulip mania and Holland was the publishing
capital of the world. There were newspapers, there were broadsides, there
were pamphlets. And I think that's necessary.
SMITH: Now, Shiller says that this pop psychology definition of bubbles,
this used to be heresy in the economics field but it's not anymore.
SHILLER: Yeah. I used to feel embarrassed to say the word bubble. It's like
showing up at an astronomy seminar and talking about astrology, you know,
you don't get a good reception. I went through finance textbooks and, look,
is the word bubble in the textbook? This is like 20 years ago. Absolutely not.
That's just rubbish. Don't ever say that around here.
KESTENBAUM: Now it's in a textbook? 6 Planey Money NPR
SHILLER: Now it's back into the textbooks, yeah.
KESTENBAUM: OK. So that's Shiller's definition of a bubble. Eugene
Fama's response is, so what? Lots of things that meet that definition don't
crash. OK, this one's my example, not his, but look at Google, right? It had a rapid run-up in price.
SMITH: Check. Over the last nine years, Google's gone up more than 1,000 percent.
KESTENBAUM: Stories people tell to justify the high price.
SMITH: Check. The people at Google are geniuses.
KESTENBAUM: (Laughter) Lots of emotions, envy, regret.
SMITH: Oh, it used to be $85 a share - $85 a share and now it is over a
thousand dollars a share. Kills me.
KESTENBAUM: So is Google in a bubble? If it crashes, people will say it
was a bubble. But we're asking now. Fama says if you think something's a
bubble, you're basically predicting that it will end, as bubbles always end in
a spectacular crash. And he doesn't think anyone can do that kind of prediction reliably.
FAMA: Because I don't think there's anything in the statistical evidence that
says there is - anybody can reliably predict when prices go down. So if you
interpret the word bubble to mean I can predict when prices are going to go down, you can't do it. KESTENBAUM: Explain why.
FAMA: I believe markets work. And if markets work, those things shouldn't
be predictable. If I can predict that housing prices will go down, if the
market's working properly they should go down now. KESTENBAUM: Why?
FAMA: Because what you're saying is I have information that prices will go
down and that information is not in the prices. If the market's working
properly, the information should be in the prices.
KESTENBAUM: Because the people who believe it will go down would buy or sell something that... 7 Planey Money NPR
FAMA: They won't buy the house, right. If they think the prices are going
down, they won't buy the house.
SMITH: So Fama argues that the bubble definition makes no sense because
you cannot use it to predict you are in one. And then Shiller says you can -
maybe not predict the actual date that a bubble is going to burst and the
stock market will crash, but you can tell it's coming.
SHILLER: You can have a fairly high degree of confidence. That's what I
felt in the stock market in the late 1990s. I wrote the first edition of my book
"Irrational Exuberance" then because - and I was rushing to get it out. I told
my publisher, Princeton, please get this out because I want this book out
before the crash, not after. And then again I felt that in the 2000s with the housing bubble.
SMITH: Now, we should make this very clear, Shiller was on the record for
these two events. He said there was a bubble in stocks in the 1990s. He
said there was a bubble in housing in the 2000s and he was right.
KESTENBAUM: All right, I'll take up Fama's side here. Fama's response is
that he's looked at a lot of data of people trying to predict the stock market.
And he says there is very little evidence that anyone is any good at it. Sure,
some people seem to make a killing but for the most part, he says, that can
be explained by just dumb luck. There are millions of people out there
making predictions, buying and selling stocks. Some of them will happen to
pick the ones that go up and they'll look like geniuses afterward. That's
basically how he feels about people who say they can predict bubbles.
FAMA: So what happens each time is the media goes in and find somebody
who predicted it. That person gets anointed. You don't go back and look at
past predictions and see, is this just luck?
SMITH: So was Shiller one of those people who was anointed by the media? FAMA: Oh, yes.
KESTENBAUM: Because he happened to be right about this one, he would say.
FAMA: Right. Well, he and other people - there were others. 8 Planey Money NPR
KESTENBAUM: You know, people have done experiments in the lab where
they can create bubbles from sort of psychology, people feeding on each
other and getting whipped up in a frenzy.
FAMA: (Laughter) Right. What does that prove? (Laughter).
KESTENBAUM: I mean, why do you find it so hard to believe that that
might happen in the real world?
FAMA: Oh, it can - you use the key word - believe. I'm not a believer. I'm an empiricist.
KESTENBAUM: What would prove it to you that there were bubbles? FAMA: Empirical evidence. KESTENBAUM: Such as?
FAMA: Well, that you could show me that you can predict when these things turn in some reliable way.
KESTENBAUM: So what is your challenge to Robert Shiller he should predict the next bubble?
FAMA: (Laughter) All right. Well, I don't know. Not just the next one, you
know, statistical reliability means more than two really. KESTENBAUM: The next 10?
FAMA: Well the next 10 would be really convincing. Yeah, then I'd be convinced.
SMITH: This is it, David. We have a way to solve this debate. Finally, the
gauntlet has been thrown down, and we presented the challenge to Professor Robert Shiller.
KESTENBAUM: Fama said he would believe there are bubbles if you could predict 10 of them in a row.
SHILLER: Yeah, but I don't live that long. You know, these big bubbles are
rare events that play out over years. They can go a long time.
KESTENBAUM: If you lived long enough, do you think you could make
good on Gene Fama's request that you predict 10 bubbles in a row?
SHILLER: If I lived long enough, yeah. 9 Planey Money NPR
KESTENBAUM: You do think you could?
SHILLER: I think so. But - yeah. I'm not the most self-confident person.
KESTENBAUM: Robert Shiller and Gene Fama told us they agree on the
facts that the other has uncovered, they just don't agree on the
interpretation. But to me, that seems like a big deal. Interpretation here is
everything. If you think bubbles are predictable and due to crazy psychology,
that suggests that something can be done to stop or to prevent them. If on
the other hand, you think bubbles are really hard or impossible to predict,
well, then there's not much you can do.
SMITH: And this is where the economics Nobel differs from say physics or
something because you don't get the science prizes until everyone pretty
much agrees on the topic. It's a done deal. Peter Higgs won the Nobel Prize
in physics this year because they discovered the particle he predicted, the Higgs boson. KESTENBAUM: Boson. SMITH: Boson.
KESTENBAUM: (Laughter) Discoveries like that, I think, are harder to come
by in economics. That's just the way it is. I mean, economics is more of like
an evolving argument. Even in the press release, the Nobel Committee -
they applaud these two men for doing work that in their words is surprising and contradictory.
SMITH: And, you know, talking to Shiller and Fama - I mean, they clearly
have a love for this aspect of economics. They have a love of the argument,
and they didn't seem terribly alarmed that two different world views will have
to share the same prize. Shiller says it's kind of what he signed on for.
SHILLER: There's something inherently difficult about economics. It just -
apparently, you can't run a controlled experiment. You can't replicate
circumstances. It's - everything is changing all the time. I think we're doing
pretty well given the difficulty of the subject matter.
KESTENBAUM: Shiller's co-laureate Gene Fama says the Nobel Prize has
accomplished one thing at least. It's got people talking about this question.
FAMA: Well, this is the first time anybody from NPR ever contacted me to
do an interview, so we're talking 50 years here. People all of a sudden are 10 Planey Money NPR
interested in what you think and say. And you haven't really changed, so
you wonder what it's all about (laughter).
KESTENBAUM: Robert, you know I told Fama that I actually did interview
him several years ago, but then after we got off with him, I went and looked
up the story. And it turns out I did not use any tape from him in the story.
So he wasn't actually on the radio. Sorry.
SMITH: It is worth pointing out that there is a third man who is sharing the
prize with Fama and Shiller, Lars Peter Hansen from the University of
Chicago. And Lars was added to this prize basically for figuring out the
statistical math for how to resolve debates just like this. Not that anyone's
done it yet, but the Nobel Committee clearly wanted to give us a little hope.
(SOUNDBITE OF SONG, "I'M FOREVER BLOWING BUBBLES")
NAT GONELLA AND HIS NEW GEORGIANS: (Singing)I'm forever
blowing. You're forever blowing bubbles. Pretty bubbles in the air. Oh, bubbles, pretty bubbles...
KESTENBAUM: As always, we'd like to know what you think. You could
send us email planetmoney@npr.org.
SMITH: Or find us on any social media you can think of. We're on
Facebook. We're on Twitter. We're on Spotify. Do we have an Instagram account? KESTENBAUM: For the T-shirts.
SMITH: All right. Seed to shirt. Search the hashtag. I'm Robert Smith.
KESTENBAUM: And I'm David Kestenbaum. Thanks for listening.
(SOUNDBITE OF SONG, "I'M FOREVER BLOWING BUBBLES")
NAT GONELLA AND HIS NEW GEORGIANS: (Singing) Oh, die. Fortune's
always hiding. Fortune's always hiding. I've looked everywhere.
(Unintelligible). I'm forever blowing. You're forever blowing bubbles. Pretty
bubbles, bubbles, in the air, bubbles. Oh, bubbles in the air. 11 Planey Money NPR Copyright © 2013 NPR. All rights reserved. Visit our website terms of use and
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