When the 1990’s Internet bubble pushed markets to dizzying heights, one man warned of the dangers of this irrational exuberance, Project Syndicate columnist Robert Shiller. Schiller, a Professor of Economics at Yale and chief economist at MacroMarkets LLC, is the author of The Subprime Solution: How Today’s Global Financial Crisis Happened, and What to Do about It.
Recession Insurance
By Robert J. Shiller
NEW HAVEN – The Chief Economist of the International Monetary Fund, Olivier Blanchard, and several IMF economists have proposed in a recent paper that governments should offer what they call “recession insurance.” Companies and/or individuals would buy insurance policies, pay a regular premium for them, and receive a benefit if some measure of the economy, such as GDP growth, dropped below a specified level. Such insurance, they argue, would help firms and people deal with the “extreme uncertainty” of the current economic environment.