An interview with Robert J. Shiller, author of Finance and the Good Society
The title of your book, Finance and the Good Society, might strike some readers as a contradiction in terms. Why are they wrong?
Finance is widely viewed as an activity that promotes inequality. But financial institutions can be democratizing and can reduce inequality if they are set up right. 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.
Who are you trying to reach with this book?
My first inspiration was my college students, who are trying to find their place in the world. Doing just about anything important for our society requires some knowledge of finance and working with people in the various financial roles outlined in the book. As I worked on it more, though, I conceived a broader mission, namely rethinking how people in these financial roles actually work together to produce a good society. Thinking about this is something we should all do because it will help us do a better job of figuring out how financial innovation can improve society.
How does the current financial crisis relate to your book?
The financial crisis is a growing pain, the kind of accident that happens as we develop and move forward. There was too much complacency about existing institutions. Our reaction to the crisis should primarily be to develop fundamental financial innovations that better serve our real goals.
Given the aims of the good society, what role should government play in the financial sector?
We have to be careful that government isn't captured by existing financial interests. People have to see a sharp distinction between financial forms as they exist today, and that often serve some specific interests, and the kinds of democratized forms we might see tomorrow. A properly functioning government and a properly functioning financial community should consider the interests of all elements of society, and will encourage innovation that will eventually make existing financial forms obsolete. Doing this well requires technical financial expertise, not political slogans, and respect for the experience of people in the financial community.