Robert Shiller: The value of recession insurance

Pub date January 15, 2009
SectionBruce Blog

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.