Chi-chuan Lai (賴麒全) & Yuan-ling Liang (梁元齡) / Campus Reporter
Robert J. Shiller, the 2013 Nobel Prize Laureate in Economic Sciences and professor at Yale University, gave a speech at National Chengchi University on July 12. A great number of audience, including professors, students and financial professionals were attracted to the conference hall. Celebrating the 90th?anniversary, President Chow (周行一) said it is a great honor to have Prof. Shiller come to NCCU for the series of events, as this is his only lecture on campus during his stay. Chow also regarded Prof. Shiller’s academic accomplishment as the model for NCCU’s future aim of focusing on inter-discipline .
During the press conference, when talking about the economic status of Taiwan, Shiller said that there are still many people in their 20s living with their parents and being concerned about their future. He was positive about President Tsai’s housing policy whereas also reminded some possible resistance caused by social stratification.
Under the topic of??“Asset Price Inflation In Housing, Stock and Bond Markets”, Shiller explained the overpricing phenomenon in different asset markets. Taking stock market for example, there was once a sharp rise in stock while the growth in EPS (Earnings per Share) was subtle. According to Shiller’s study, irrational reactions in the society will reflect on the market emotionally, leading to a financial bubble and bankruptcy. The causes for such phenomenon could be attributed to media over-emphasizing the transaction and investment, also the speculation of investment.
“Narrative Economics”, brought up by Shiller, was different from other financial researches in the past, which mainly focused on rational statistic analysis. On the contrary, Shiller emphasized on the impact of “stories” happened within the society, suggesting the importance of mental status and human behaviors. Based on “Epidemic Models” invented by Kermack–McKendrick in 1927, Shiller compared the spread of these “stories” as contagious diseases and divided the “stories” into three phases: the S-I-R model for analysis.
Robert Shiller revised the traditional model of measuring asset prices by taking inflation and other factors into consideration. According to Shiller, the actual asset price is defined not only the factors in the market but also factors existed in “stories”. A strong example was the drop in US housing price in the early 1920s, which remained a myth until deeper social status was elaborated with more understanding of the stories. Another example was the French government’s oversight of the “Laffer Curve”, which reflected a difference in tax policies compared to other countries at that time.
In response to student Yu-Po Chang asking that whether the US student loan will cause a drop in housing price, Shiller said the factor could be another narrative used to predict possible flow of the market, since it has not been understood from a wider aspect. As for the accurate selling point of a rising asset, asked by Prof. Robert Chang from the Finance Dept., Shiller said too much trade is never a positive phenomenon, while mentioning a paper by Prof. Yu-jane Liu (劉玉珍), which is helpful if the audience want to understand more about “day-traders”.