Bubbles and Economic Theory

/ Matthew Clemente / Leave a comment

Bubbles and Economic Theory

Recently, the NPR’s Planet Money Podcast spoke with two of the three economists who won the 2013 Nobel Memorial Prize: Eugene Fama and Robert Shiller. Fama and Shiller are an odd combination as they represent very different philosophical positions in the study of economics.  Shiller is a proponent of behavior economics, whereas Fama ascribes to an efficient-market theory.  This episode which discusses economic bubbles is an example of this debate. As the Planet Money team explain, “Shiller is probably the most famous analyst of bubbles; Fama is probably the most famous skeptic of bubbles.”

Here is a description and excerpt from the interview: 

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?

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.

One Step Forward, Two Steps Back: Legal Barriers to a Women’s Equality

/ Sara Wolkensdorfer / Leave a comment

On Monday, October 28, Texas District Judge Lee Yeakel ruled that new abortion restrictions passed by the Texas Legislature were unconstitutional, despite the Texas attorney general’s office’s argument that the law works to protect both the life of the mother and her fetus. Judge Yeakel reasoned that doctors in abortion clinics should have the right to do what they think is bets for their patients and that the restrictions would place further restrictions on women’s access to abortion clinics.

Only a few days before, on October 24, Above The Law broke news of a memorandum from Clifford Chance, a New York law firm that lays out how a female attorney should dress, act, and speak while on the job. The memorandum was leaked by a female associate and recipient of the memo, commenting that, “[F]emale associates are very upset by not only the elementary nature of the tips themselves, but the suggestion that these would only apply to women. We have never been a very female friendly firm, but this is beyond the pale.” Among the many topics covered in the 5-page memorandum, quite a few stand out for their ignorant devotion to stereotypes: “Don’t giggle; Don’t squirm; Don’t tilt your head; Practice hard words; Wear a suit, not your party outfit; No one heard Hillary the day she showed cleavage.”

Clearly, it appears that while women have made huge strides in gaining legal control of their minds and bodies, they have also continued to be subjected to gender stereotypes that demean and perpetuate structural inequalities within our society. And in particular, women in the legal world continue to be expected to walk the fine line between being a “career woman” and having power, AKA being more like a “man,” while at the same time maintaining “traditional” ideals of feminism, docility, and passivity, AKA being like a “woman.” In this culture, if we (as women) want equality we have to act like men, but if a woman acts too much like men in terms of aggression, drive, and passion, she is seen as a “bitch.” This memorandum perfectly exemplifies the oh-so-impossible line that gender stereotypes provide and the sheer impossibility of being a woman that has it all.

So, what can be done about such a deeply-embedded and traditionalized mentality about gender in the workplace, and in the larger world?

First, never think that stories like that in Texas are the norm. Women are always fighting for the means to be free in a man’s world, and making one stride is just winning the battle, not the war.

Second, as a female, don’t be afraid to speak up: so many times we are told to silence who we are in order to become who we think society wants us to be. Being strong, confident, independent, and goal-oriented does not equate to being a bitch or “manly;” it equates to being a confident, independent, and goal-oriented human being.

Lastly, female attorneys are just as capable as male attorneys – to demean and degrade them by sending such a blatant display of sexism is something that has no justification. Women should not have to live up to male standards, they should be able to create their own. As future male and female attorneys, we have to be willing to see these obvious displays of misogyny and patriarchy, and begin to fight back. Instead of taking one step forward and two steps back, we should be continuously moving towards a world without patriarchy.

 

Sunday Funday: “Shawshank” Star Tim Robbins Teaches Acting in Prison

/ Matthew Clemente / Leave a comment

Sunday Funday: “Shawshank” Star Tim Robbins Teaches Acting in Prison

Several weeks ago, CBS News Sunday Morning ran a story about a prison acting program run by actor Tim Robbins, best known for his role as a prisoner in The Shawshank Redemption. 

Here is an excerpt from the story:

The inmates at this medium security prison in Norco, Calif., are serving time for crimes ranging from possession of marijuana to murder.

One of their coaches is Academy Award-winning actor Tim Robbins.

“It creates this place, particularly important in prison, where people can step outside of what’s expected of them and try to explore new emotions, create new realities, create new truths for themselves,” Robbins said.

The project, now in its seventh year, is funded by The Actors’ Gang, which Robbins and some acting friends founded in 1981.

For more public policy related video/audio, be sure to check out the SLACE Archive.

Sunday Funday: “Shawshank” Star Tim Robbins Teaches Acting in Prison

/ Matthew Clemente / Leave a comment

Sunday Funday: “Shawshank” Star Tim Robbins Teaches Acting in Prison

Sunday Funday: “Shawshank” Star Tim Robbins Teaches Acting in Prison

Several weeks ago, CBS News Sunday Morning ran a story about a prison acting program run by actor Tim Robbins, best known for his role as a prisoner in The Shawshank Redemption. 

Here is an excerpt from the story: 

The inmates at this medium security prison in Norco, Calif., are serving time for crimes ranging from possession of marijuana to murder.

One of their coaches is Academy Award-winning actor Tim Robbins.

“It creates this place, particularly important in prison, where people can step outside of what’s expected of them and try to explore new emotions, create new realities, create new truths for themselves,” Robbins said.

The project, now in its seventh year, is funded by The Actors’ Gang, which Robbins and some acting friends founded in 1981.

“Pornography: What Do We Know?”

/ Matthew Clemente / Leave a comment

“Pornography: What Do We Know?”

That was the question being examined on the BBC’s Analysis radio programme. Here is a description of the show: 

What do we really know about the effects of pornography? 

Public debate has become increasingly dominated by an emotive, polarised argument between those who say it is harmful and those who say it can be liberating. Jo Fidgen puts the moral positions to one side and investigates what the evidence tells us. She explores the limitations of the research that’s been carried out and asks whether we need to update our understanding of pornography. She hears from users of pornography about how and why they use it and researchers reveal what they have learnt about our private pornographic habits. 

With pornography becoming increasingly easy to access online, and as policy-makers, parents and teachers discuss how to deal with this, it’s a debate that will have far-reaching implications on education and how we use the internet. 

Producer: Helena Merriman 

Interviewees: 

Professor Neil Malamuth – University of California 
Dr Miranda Horvath – Middlesex University 
Dr Ogi Ogas – Author of A Billion Wicked Thoughts 
Professor Roger Scruton – Conservative philosopher and Author of Sexual Desire: A Philosophical Investigation 
Professor Gail Dines – Wheelock College, Boston.