This afternoon in Stockholm, I attended 3 30-minute lectures presented by the Nobel Prize laureates in economics. Given the recipients, I had expected some fireworks, but we didn’t get any until the last presentation. Do the differences in ideas between two of the presenters, I had hoped for a Q&A after the presentations were complete. But that didn’t happen. This is something that the Nobel Prize folks should consider in the future, particularly with the economic laureates.
The lead off presentation was by Eugene F. Fama, a financial statistician from the University of Chicago. Fama gave background on his pioneering studies on asset pricing. He basically dealt with the origins and directions of his modeling efforts. As with all the presenters, Fama used PowerPoint visuals.
The second presenter was my brother, Lars Peter Hansen, an economist from the University of Chicago. Unlike previous presentations of Lars’s that I have witnessed, he stayed fixed behind the podium. His presentation, like Fama’s largely dealt with the evolution of his economic models. Lars described his modeling efforts as “something without having to do everything.”
In interviews with the Utah press, I had indicated that much of Lars’s mathematical work was difficult for most people to understand. He took serious objection to that characterization, but after listening to Lars’s Nobel presentation, I wondered just how many people in the audience really understood the true nature and implications of his research. But his presentation was well prepared and highly professional.
By contrast, the last speaker Robert J. Shiller (an economist from Yale University) was much more informal and he did walk around the stage. Rather than deal with the nature of his modeling efforts, he discussed the shortcomings of economic modeling, particularly as it relates to financial and macroeconomic markets. He tried to illustrate the difficulties that economic models have in dealing with financial “bubbles.” Shiller thought the stock market was more like a beauty contest than an exercise in rational behavior, thereby taking shots at both Fama and Hansen.
Shiller argued for including more noneconomic data into the equation. He made a pitch for using more biological and psychological (?) information. He argued that financial markets are too volutile for current economic models. To use his expression “people are crazy.”
Shiller also plugged his idea of having more economic research done with financial housing data sets. And he found time to plug two of his books. After Shiller, the show was over. They brought up all three recipients for a final round of applause. Fama and Hansen did not get a chance to respond to Shiller’s accusations.
One thing that seemed missing from session was an introduction that explained why the three 2013 Nobel laureates were linked together. What was the overarching theme? For example, why was Lars included with Fama and Shiller. From this noneconomist’s perspective, Lars might have been better paired with the 2011 recipients.
Unlike the presentations which were made at the Swedish Embassy in Washington DC, there was no Q&A session. In DC, Fama had argued against Federal aid for basic research, something that the laureates from the sciences took serious exception to, as did Lars. For example, Hansen was concerned that without Federal funding, researchers might be tempted to be too beholden to their funders.
In a future blog entry, I hope to have Lars’s response to Shiller.