Robert J. Shiller

Robert J. Shiller – Life, Career, and Famous Quotes

Explore the biography, contributions, and wisdom of Robert J. Shiller, the American economist and Nobel Laureate. Learn about his theories, key works, and famous quotes on markets, risk, and human behavior.

Introduction

Robert J. Shiller is one of the most influential economists of our era, blending rigorous quantitative analysis with behavioral insight to shed light on financial markets, asset bubbles, and the psychology behind economic decisions. Born March 29, 1946, Shiller has held a long and distinguished academic career, serving as a Sterling Professor at Yale University, and was awarded the Nobel Memorial Prize in Economic Sciences in 2013 for his empirical analysis of asset prices.

Unlike many economists who lean heavily into abstract models, Shiller’s work emphasizes the narrative, emotional, and psychological forces that drive markets — making his perspective particularly resonant in times of crisis and uncertainty.

Early Life and Family

Robert James Shiller was born in Detroit, Michigan to Ruth (née Radsville) and Benjamin Peter Shiller.

Raised in a Protestant (Methodist) setting, Shiller’s upbringing combined a scientific curiosity with a grounding in moral and social norms.

Robert Shiller is married to Virginia Marie (Faulstich), a psychologist, and together they have two children.

Education and Formative Years

Shiller began his higher education journey at Kalamazoo College (Michigan) for two years, before transferring to the University of Michigan and earning his B.A. in 1967, graduating Phi Beta Kappa.

He went on to the Massachusetts Institute of Technology (MIT), where he earned an S.M. degree in 1968 and completed his Ph.D. in 1972. His doctoral dissertation was titled “Rational expectations and the structure of interest rates,” and his doctoral advisor was Franco Modigliani.

During these years, Shiller was absorbing both the formal, mathematical financial tradition and the threads of skepticism that would later define his work.

Academic Career and Major Contributions

Academic Posts & Honors

• Shiller joined Yale University in 1982 and eventually became a Sterling Professor of Economics.

• He has also held appointments at the University of Minnesota, the Wharton School of the University of Pennsylvania, and given visiting lectures at global institutions such as the London School of Economics.

• He served as president of the Eastern Economic Association (2006–2007), and as vice president of the American Economic Association in 2005.

• In 2009, he was awarded the Deutsche Bank Prize in Financial Economics for his pioneering research on asset price dynamics.

• In 2013, Shiller, along with Eugene Fama and Lars Peter Hansen, won the Nobel Prize in Economics, for their "empirical analysis of asset prices."

• He also is the co-founder and chief economist of MacroMarkets LLC.

Intellectual Contributions & Theoretical Innovations

Shiller’s reputation stems from contributions that challenge conventional assumptions and integrate behavioral and empirical insight. Some of his most important contributions include:

1. The Case–Shiller Home Price Index

Together with Karl Case and Allan Weiss, Shiller developed a repeat-sales house price index (commonly known as the Case–Shiller Index) that tracks home value by comparing prices of the same house over time. This index became a benchmark for U.S. real estate markets.

2. The CAPE Ratio & Excess Volatility

Shiller challenged the efficient markets hypothesis by showing that stock markets exhibit far more volatility than can be justified by rational expectations (i.e. fundamentals). He helped popularize the Cyclically Adjusted Price-Earnings (CAPE) ratio, which smooths earnings over a 10-year horizon to provide a longer-term valuation metric.

This work showed that market prices often deviate significantly from what would be expected under strictly efficient models — a phenomenon sometimes called the excess volatility puzzle.

3. Bubbles, Crises & Behavioral Finance

Long before the 2008 financial crisis, Shiller warned of overvaluation and speculative bubbles in both housing and stock markets. For example, as early as the early 2000s, his book Irrational Exuberance argued that markets were at risk of dramatic corrections.

He emphasized that psychological, social, and narrative forces drive speculation, sentiment, and collective euphoria or fear — and that these features must be part of economic models.

4. Narrative Economics

In recent years, Shiller has advanced the concept of Narrative Economics — the idea that the stories people tell, believe, and spread influence economic behavior, decision-making, and large-scale outcomes. His 2019 book Narrative Economics: How Stories Go Viral and Drive Major Economic Events lays out this vision.

He argues that to understand economic shifts, we must analyze the content, spread, and evolution of narratives — a notion that challenges purely quantitative orthodox models.

Legacy and Influence

Robert Shiller’s influence is broad, crossing academia, policy, media, and public discourse:

• His empirical tools (CAPE, Case–Shiller index) are widely used by analysts, investors, central banks, and regulators to monitor valuation and risk.

• His warnings of bubbles and crises have often proved prescient — elevating the role of skepticism and humility in financial forecasting.

• Shiller’s Narrative Economics has inspired economists, sociologists, and data scientists to study how stories and media shape macro trends.

• He has shaped public debate: his op-eds, media commentary, and public lectures make economic ideas accessible beyond academia.

• His approach has influenced a generation of behavioral economists and financial thinkers who blend psychology with market analysis.

Personality, Style & Intellectual Character

Shiller is known as a deeply curious, reflective, and intellectually fearless scholar. In his biographical reflections, he has remarked on how the Nobel recognition occasioned introspection — asking why certain instincts led him into economics and why he chose collaborators with certain traits.

He combines rigor and humility: while he develops mathematical models and empirical tools, he is ever cautious about overconfidence in predictions, acknowledging the limits of knowledge and the role of uncertainty.

He has also expressed a lifelong interest in interdisciplinary thinking — being drawn to biology, psychology, narrative, and history — seeing economics not as a sterile discipline but one intertwined with human behavior.

Famous Quotes by Robert J. Shiller

Here are some notable quotes reflecting his views on finance, behavior, markets, and society:

“The ability to focus attention on important things is a defining characteristic of intelligence.”

“Irrational exuberance is the psychological basis of a speculative bubble. I define a speculative bubble as a situation in which news of price increases spurs investor enthusiasm … bringing in a larger and larger class of investors … despite doubts about the real value.”

“Economists who adhere to rational-expectations models of the world will never admit it, but a lot of what happens in markets is driven by pure stupidity — or, rather, inattention, misinformation about fundamentals, and an exaggerated focus on currently circulating stories.”

“Finance is not merely about making money. It's about achieving our deep goals and protecting the fruits of our labor. It's about stewardship and, therefore, about achieving the good society.”

“Hesitation is often like procrastination. … One may have vague doubts … Meanwhile, other issues intrude on thought, and no decision is taken.”

“The future is always coming up with surprises for us, and the best way to insulate yourself from these surprises is to diversify.”

These quotes offer glimpses into Shiller’s mindset — valuing patience, humility, broad vision, and an awareness that markets follow stories as much as they do data.

Lessons and Insights from Robert Shiller

1. Markets are narratives as much as numbers.
   Shiller’s Narrative Economics suggests that to understand financial trends, we must interpret the stories people tell and how they propagate — acknowledging that belief, rumor, and sentiment matter.

2. Skepticism is an asset.
   His ability to question prevailing orthodoxy (e.g. efficient markets) and to warn of bubbles underscores the importance of intellectual humility in economics and investing.

3. Diversification is more than strategy — it's prudence.
   In a world of surprises, shocks, and narrative shifts, spreading exposure helps guard against catastrophic risk.

4. Bridging disciplines enriches insight.
   Shiller’s work crosses economics, psychology, sociology, and literature — showing that real-world phenomena benefit from integrated thinking.

5. Warning can be part of service.
   By sounding alarms about overvaluation and crisis risks, Shiller exemplifies how academics can contribute to public awareness and policy discourse.

6. Empiricism grounds imagination.
   Though interested in narratives and psychology, Shiller never abandons data — he constructs indices, models, and statistical tests to anchor his ideas.

Conclusion

Robert J. Shiller stands as a towering figure in modern economics — a thinker who refuses disciplinary boundaries, who blends the quantitative and the human, and who insists we listen to the narratives we live by. His work has reshaped how we measure, interpret, and respond to asset markets, bubbles, and financial crises.

For students, economists, and curious readers alike, Shiller’s career teaches us to combine rigor with imagination, caution with curiosity, and humility with ambition. His writings — from Irrational Exuberance to Narrative Economics — remain foundational in understanding not just markets, but the human hearts behind them.

If you’d like, I can also pull together a full annotated list of his major works (books, papers) or provide deeper commentary on Narrative Economics or Irrational Exuberance. Would you like me to do that?