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Shiller And Fama Share Nobel, Disagree About Everything

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I like and respect Bob Shiller's work. One of the few who saw the crash coming.

Fama, like rest of the Chicago school, is a charlatan. He not only didn't expect a crash, he espouses an economic philosophy which asserts that crashes are impossible.

It is no secret that two of the three winners of this year's Nobel economics prize disagree – after all, they are economists. But Robert Shiller has taken the tiff with Eugene Fama over the efficiency of markets to a new level.

Highlighting what he sees as a mismatch between Fama's findings and his theories, he suggested his fellow laureate must feel like a Catholic priest who has discovered God does not exist.

While Shiller holds that investors, being human, can be swayed by psychology, Fama contends markets are always efficient, with people incorporating all available information into prices.

To mark their acceptance of the prize last night, the two economists and fellow prizewinner Lars Peter Hansen spoke to Swedish public service television SVT about sharing the Nobel prize for their seemingly opposing theories.

While Fama said it was "great" to share the prize, Shiller was less enthusiastic. "[Fama] is a careful researcher, an inspired researcher," he said, adding: "I don't know if Fama ever states his theory really clearly, if he did it might sound a little odd."

The author of Irrational Exuberance mused that Fama may suffer from "a cognitive dissonance" given, he argued, that his own findings contrast with orthodoxy at his University of Chicago home.

Meanwhile, Fama said there was no way to settle their 21-year debate.

Shiller, whose wife is a psychologist, told SVT (just before 28 minutes into the interview): "I shouldn't try to psychoanalyse Eugene Fama but I know that he is committed … to a libertarian philosophy, teaching at the University of Chicago where Milton Friedman once lived.

"It must affect your thinking somehow that they really believe in markets. I think that maybe he has a cognitive dissonance. His research shows that markets are not efficient. So what do you do if you are living in the University of Chicago? It's like being a Catholic priest and then discovering that God doesn't exist or something, you can't deal with that, you've got to somehow rationalise it."

http://www.theguardi...ler-eugene-fama

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