Macro Markets: Creating Institutions for Managing Society's Largest Economic Risks

by Robert J. Shiller

Overview

Macro Markets puts forward a unique and authoritative set of detailed proposals for establishing new markets for the management of the biggest economic risks facing society. Our existing financial markets are seen as being inadequate in dealing with such risks and Professor Shiller suggests major new markets as solutions to the problem. Shiller argues that although some risks, such as natural disaster or temporary unemployment, are shared by society, most risks are borne by the individual and standards of living determined by luck. He investigates whether a new technology of markets could make risk-sharing possible, and shows how new contracts could be designed to hedge all manner of risks to the individual's living standards. He proposes new international markets for perpetual claims on national incomes, and on components and aggregates of national incomes, concluding that these markets may well dwarf our stock markets in their activity and significance. He also argues for new liquid international markets for residential and commercial property. Establishing such unprecedented new markets presents some important technical problems which Shiller attempts to solve with proposals for implementing futures markets on perpetual claims on incomes, and for the construction of index numbers for cash settlement of risk management contracts. These new markets could fundamentally alter and diminish international economic fluctuations, and reduce the inequality of incomes around the world.

Product Details

ISBN-13:	9780191027291
Publisher:	OUP Oxford
Publication date:	04/07/1994
Series:	Clarendon Lectures in Economics
Sold by:	Barnes & Noble
Format:	eBook
File size:	4 MB

About the Author

Yale University

Table of Contents

1. Introduction

2. Psychological Barriers

3. Mechanisms for Hedging Long Streams of Income

4. National Income and Labour Income Markets

5. Real Estate and Other Markets

6. The Construction of Index Numbers for Contract Settlement

7. Index Numbers: Issues and Alternatives

8. The Problem of Index Revisions

9. Making It Happen

Notes

References

Author Index

Subject Index

Editorial Reviews

"Fresh, provocative, well written, and well argued. I recommend it not only to financial and macroeconomists, but to the larger economic community interested in thecharacter and costs of business cycles."

Literature Journal of Economic

"[A] terrific book....Fresh, provocative, well written, and well argued. [Recommended] not only to financial and macro-economists, but to the larger economic community interested in the character and costs of business cycles."—Journal of Economic Literature

"The book, unique in its approach...offers an unusual combination of passionate advocacy with precise theoretical reasoning....This excellent book does more than provide a good treatment of some self-contained and specialized questions. It is also likely to initiate a research program. For what Shiller has done is to imagine a sometimes surprising and unfamiliar world in which risk-hedging and risk-spreading markets, while not necessarily complete, are at least a great deal more complete than they are at present."—The Economic Journal

"A brilliant new book that I highly recommend."—Peter L. Bernstein, Journal of Portfolio Management

"Fresh, provocative, well written, and well argued. I recommend it not only to financial and macro-economists, but to the larger economic community interested in the character and costs of business cycles."—Journal of Economic Literature

From the Publisher