Hand-wringing over Nobel Prize in economics

This year’s Nobel Prize in economics went to Eugene Fama, Robert Shiller, and Lars Hansen, leading to much hand-wringing over the apparent conflicts between the work of Fama and Shiller (Hansen is mostly known for research on risk, which may be why so few are discussing him).

Fama is famous for the efficient markets hypothesis, which posits that securities prices reflect all available information, which on the face of it makes quite a contrast to Shiller’s central assertion that animal spirits — greed and fear — drive financial markets and make bubbles a regular feature.

First off, economics is a social science, not a hard science, so do not kid yourself that anyone has the final word on anything.