Nobel Prize in economics goes to housing sceptic
The Nobel Prize in economics has been awarded to three economists focused on the strengths and shortcomings of asset markets.
Eugene Fama, Robert Shiller and Lars Peter Hansen have separately come up with different but complementary branches of modern asset market theory.
Shiller, the best known of the trio, is famous for his work on the inefficiencies of asset markets. In 2005, he published a paper suggesting the US housing market may be overheating.
Speaking to Reuters after his win, he told the wire service he was seeing some of the same signs today in America and across the world.
"It is up 12% in the last year [in the United States]. This is a very rapid price increase right now, and I believe that it is accelerated somewhat by the Fed's policy," he said.
Australia – as well as China, Brazil, India, Norway and Belgium – is witnessing similar price rises, he said.
“There are so many countries that are looking bubbly.”
In an interview with Bloomberg earlier this year, Shiller took aim at the notion that housing was an ‘investment’.“[Housing] takes maintenance, it depreciates, it goes out of style. All of those are problems. And there’s technical progress in housing. So, new ones are better…
“So, why was it considered an investment? That was a fad. That was an idea that took hold in the early 2000s. And I don’t expect it to come back. Not with the same force. So people might just decide, ‘Yeah, I’ll diversify my portfolio. I’ll live in a rental’. That is a very sensible thing for many people to do.”
This article first appeared on SmartCompany.