TEXT OF INTERVIEW
Bob Moon: So far, so good for the Obama administration’s new plan to get toxic assets off the balance sheets of the nation’s banks. Wall Street was clearly dazzled, which may be just what the doctors ordered.
In this case, I’m referring to a couple of distinguished economic experts: Dr. George Akerlof of the University of California at Berkeley, and Dr. Robert Shiller of Yale. Their new book, Animal Spirits, explores how human psychology drives the economy. Welcome to the program, both of you.
George Akerlof: Well, thank you for having us.
Robert Shiller: Bob, it’s a pleasure.
Moon: So, let me ask you: I guess I am one of those prophets of gloom and doom that everybody talks about when it comes to the economy lately. What’s your message to me? Is there any way that my message might help improve the economic situation? Mr. Shiller?
Shiller: That’s putting a lot on you. I think the media have an important role, but they’re not the cause of this problem and they’re not the solution. We need real government action, we need stronger fiscal policy to get us out of this crisis and get our confidence back.
Moon: And the government can’t actually sway public opinion, if you will, about what our situation is?
Shiller: The fundamental problem we have today is that everyone thinks we’re in a bad economy. So that means employers don’t want to hire people, and people don’t want to spend, and it’s a vicious circle. The kind of thing that the Obama administration is doing and Congress is doing is on the right track — it’s just not big enough yet.
Moon: And why does the government, Mr. Akerlof, need to get out in front of this more than anyone else?
Akerlof: Well, when people have good psychology and they’re over-exuberant, then the government should be careful that it has good regulations. When the story turns and people have bad regulations, then it’s up to the government to be sure that people have what everybody needs. What everybody needs and wants is a job, what businesses and consumers need is they need credit. And so the government should fulfill those two roles.
Moon: And what should the government do going forward? Professor Shiller?
Shiller: Well, I’ve already said that they should be more stimulative than they are. On top of that, we really need to think over the next five or 10 years about how to respond to this kind of crisis. We had built a financial and economic system that was vulnerable. We often compare to the Great Depression — not to say it’s going to be so bad. But looking back at that period, it generated a lot of legislation and a lot of new institutions then that responded to that crisis. I think for years going forward, we are going to be responding further to this crisis, and I’m hopeful that we make positive and solid improvements in the way our economy functions.
Moon: Robert Shiller, George Akerlof, thank you very much for joining us.
Shiller and Akerlof: Thank you.
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