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I recently watched a video by Robert Shiller who seems to be a much unsung progressive economist talking about his new book Finance and the Good Society. I've always thought of him in the same class as Krugman, Stiglitz, Reich, Baker and others. What really drove me to write this diary, though in part to share a video about Finance and the Good Society, was not only the forward looking thinking in it but also the notion that one of the main criteria we need in looking for that next candidate is who they listen to. Almost everything that goes forward in politics will be tied to economic situations, or it will be about changing them.

Towards the end of the video he argues that economics, as a science, is ever so slowly, step by step, on it's way towards one day becoming a better indicator of economic behavior. He cites that this is the case with many technologies and science in general. Sometimes a better way forward is understood, but it may take many incremental developments to come about to make them possible. He is bullish that someday economics may become more of a harder science than it is now. As a critic of much of what passes for economic theory I don't think that he has any illusions that we are still a long way off from that. But, and here is what is key to the diary, he believes that over time many, many small innovations will make that possible if we are willing to try them. He cites what he sees as potential new economic innovations which have occurred over just the last two years (2010 to 2012) including wiki-like crowd sourcing by way of small investments (think Kickstarter which he doesn't mention by name). He suggests that selling a sort of warrant to investor such as Greece is now selling which pays off if Greek GDP increases over a number of years. This is modeled on the same sort of thing that Argentina used successfully after its 2002 economic collapse which encourages international investors to tie their loans not so much against a nations debt load but rather their success. If it fails, then there is no payout. He has a similar suggestion for domestic markets, more of a share in a nation's success as opposed to a bond. And he brings up others all near the end of the video.

Shiller IMHO is one of the brightest economists around today. His book Irrational Exuberance was a lonely cry in the wilderness which first predicted the stock market / tech bubble collapse at the start of G.W. Bush's first term and that recession. The 2nd edition of that book additionally predicted the housing bubble collapse which lead to the Great Recession of 2008. He was right on both of the major economic failures of the last 20 years. Shortly after the collapse of 2008, about a month after that September, I read what was his most recent book at the time, The Subprime Solution. Written earlier that year the first chapter made my hairs on the back of my neck stand on end as it sounded as if it had been written that very morning during the time when media accounts were trying to wrap their heads around what happened. Shiller had already gazed into the crystal ball as it were and stated then what others were only coming to grips with after.
I assume many of you have heard of the Case-Shiller Housing Index on Standard and Poors? It has been THE measure of the housing industry for many years. At one time they realized that nothing like it existed so they took the bull by the horns and created this widely used tool.

He has also been a strong proponent of the case that modern economics has mostly ignored the psychology of human beings when analyzing markets. It ignores greed. Most economists always assume that people will make the very best choices because it serves their best interest. He demonstrates in his work over and over that this is often wildly far from the truth and that people make irrational, emotional, or ill informed economic choices all the time. And that to ignore that is setting ones economic predictions up to fail. Just below I'll finish up by asking again, why doesn't our White House listen to Keynesian economists who have a strong track record of recognizing where markets are heading and how to use that information successfully?

Full disclosure: at this point, economically speaking, I consider Obama to be a lost cause. Perhaps one can teach an old dog new tricks, but I suspect that he is too tightly locked into his more neoliberal, Third Way economic veiw point to assume that he will change much. He listens to the likes of Simpson-Bowles, Geithner, Sumner and some suggest, Pete Peterson, turning his ear always toward the Chicago School of Economic failures and the other such supply-sided nonsense which has plagued our economy for the better part of the last 30 years. While he recognizes some of our party's economic goals through an ideology of the commonwealth of community sharing, such as a need for jobs, he still gets lost by holding mistaken such political and economic notions. He still ignores old economic blueprints from the post WWII era of high taxation and government investment which helped make us the wealthiest nation in the world. With the eminent retirement of Max Baucus again, we see an opportunity for looking towards those who might take a different tack with our nation's finances.

The point here is not so much to bash Obama as to ask who do we look to next? In some ways I'm sympathetic with Obama's economic dilemma. For instance in many ways his hands are tied in terms of job creation without a Congress that will work with him to raise the needed revenues and legislate policies from raising the minimum wage to the creation of new infrastructure to do much. But then again, he doesn't make a strong, contrary counter argument that would challenge the business-as-usual conventional wisdom of the age. Which might then push the constituents of the GOP and blue dog Democrats to insist on more flexibility and open-mindedness.

We need people to challenge those ideas. Look at how the media and the public buy into the idea that a balanced budget is the end-all be-all of government. Yet our history shows that raising debt during troubled times to prime the pump of the economy is what works. Then, when an economy is humming along that is the time to slightly raise taxes in an economy that is already creating a broader tax base to pay old debts down to manageable levels, or even create some surpluses to save for the next downturn. We need to start looking at which Democrats listen to the people cited here who make these kind of recommendations. Those who have a track record of economic predictive successes.

My point is to hopefully discuss what potential candidates for 2014 and 2016 are most likely listen to the economist so broadly invoked here. Does anyone know of any? Hillary is considered a given by many to be the next president-to-be, but I doubt that she would give them any more of an ear that Obama. I don't think she would govern in any way significantly different than Obama. She was pretty much my last choice in 2008 and I doubt that if she runs that she will change my mind this time around. Again, anyone can change but she will have to undergo a significant metamorphosis to appeal to me. This is the right time to bring up this question and to start finding who in the party has a different vision for both adhering to the FDR / Truman / Keynesian economic playbook of the 30's and 40's and looking forward to new economic innovations with all the new tools we have at hand.

Lastly, here is the video which I hope will bring about a few others to listen to Robert Shiller and his forward thinking ideas on how to start going about fixing our economy. Cheers!


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Comment Preferences

  •  Speaking of Economists (3+ / 0-)
    Recommended by:
    Noodles, Roger Fox, pierre9045

    As the armed forces demobilized after World War II and jobs were scarce in the post-war economy amongst returning veterans, Harry Truman received a lot of conflicting advice about implementing effective economic policies to spur job growth.

    Truman got so frustrated that one day he said (I'm paraphrasing slightly) to a senior aide, "Economists always tell me on the one hand, on the other hand. Could somebody find me a one-handed economist?"

  •  Krugman better be toward the top of that list. (1+ / 0-)
    Recommended by:
    Noodles
  •  "I was wrong" is not good politics (2+ / 0-)
    Recommended by:
    Noodles, quill

    and that is the hole Obama finds himself in. Obama was wrong, Obama's team was wrong, and everyone whose advise Obama followed was wrong. If Obama hints that he was wrong then the main stream media and right wing noise machine will go into overdrive and it will all be Obama's fault. And the republicans will have absolution from having gotten Obama to do their bidding, albeit Obama did not go as far as they would have liked.

    As to what do we look to next, don't kid yourself. The Bush tax cuts were a HUGE mistake. NOTHING that was promised was delivered. They missed their promised target by about $16 TRILLION dollars and counting, and yet....  

    The banks and very rich own Washington, and they are in the process of buying up the states. They own the elected officials, the judges and the regulatory agencies. If you are a democrat and want to win in 2014 or 2016 start running against Obama and the professional democrats now, as well as conservatism.

    •  yep. even more for Britain and Academia (0+ / 0-)

      Obama at least has mixed results, because he did take the advice for a modest stimulus at the beginning of the term. So it's conceivable he could switch. (Unlikely, maybe, but conceivable.)

      But Britain can't. They're too deeply wedded to making austerity work.

      And a professor who's built a career based on a wrong theory can't say "whoops". That career is dead.

      The bigger problem is that since we repeated the exact same  mistakes as the 1930s depression, we're likely to repeat again the next time this happens.

      It's not a question of knowledge.

    •  Obama doesn't need to say he was wrong. (0+ / 0-)

      He simply needs to start citing FDR, Truman, even Eisenhower, Kennedy... If Johnson hadn't bought into Vietnam he would have put those policies on steroids. Unfortunately it was impossible to fight that war and sustain his Great Society as well.

      Obama could fairly subtly change course on this politically and still make a huge change economically. Not that I expect him to. But he wouldn't need to do a full reversal. Take Chained CPI off the table, for instance, as to 'remove' a bargaining chip since the GOP won't work with him.

  •  Would Senator Warren as POTUS (0+ / 0-)

    bring in Baker and Krugman?

    Who else is likely to behave in this manner? Its a damn small list.

    .................expect us......................... FDR 9-23-33, "If we cannot do this one way, we will do it another way. But do it we will.

    by Roger Fox on Thu Apr 25, 2013 at 01:25:08 PM PDT

  •  A waste of my time. nt (0+ / 0-)

    Might and Right are always fighting, in our youth it seems exciting. Right is always nearly winning, Might can hardly keep from grinning. -- Clarence Day

    by hestal on Thu Apr 25, 2013 at 01:31:19 PM PDT

  •  hilary? (0+ / 0-)

    at this point hillary is the overwhelming favorite. she'll have her husband on her side, no small thing. and as a loyal obama lieutenant  she'll probably have him too - even over biden, i suspect. how does anyone else go up against that combo without enormous personal appeal and great financial backing (eliz. warrren is the only one that comes to mind now, and i don't see the money for her yet).

    so the question is, who has hillary been listening to? is she just another neo-liberal or is she made of stronger stuff? she did call out the "vast right-wing conspiracy" over a decade ago and she understands the game that's being played behind the scenes, but where is her heart? do we know?

    •  More of the same. (0+ / 0-)

      She would not be a good choice.  Better than a Republican but another version of Obama or Bill.

      "You have attributed conditions to villainy that simply result from stupidity"

      by newfie on Thu Apr 25, 2013 at 05:59:50 PM PDT

      [ Parent ]

    •  According to the Merlyn Project guys, (0+ / 0-)

      they predict that Hillary will be considered as good as dirt and that Chris Christie (could the republicans actually nominate him), Rick Perry (LOL?), and Andrew Cuomo appeared to be the strongest among democrats. Yes, I occasionally listen to CoasttoCoast Am. However, I believe that they're data is what they'll call one of their duds.

      However, Hillary does have a risk to come off as too elite and established. This is something that I hope doesn't win out for her if she's the favorite to win the nomination and presidency.

      If the democrats allow Chris Christie to become president, then, it will be really hard to convince people that Democrats are as viable a party as social dynamic indicate.

      I hope for Hillary to win--if not, then another democrat (especially when considering the Supreme Court).

  •  Exactly right (0+ / 0-)
    one of the main criteria we need in looking for that next candidate is who they listen to.
    IMHO this is correct too:
    at this point, economically speaking . . .Obama [is] a lost cause.
    and has been for some time. The fact he accepts neoliberal orthodoxy as "common sense" is the root of his biggest disappointments to progressive and the explanation why he proposes stuff like the chained CPI.

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