A Review Of Robert Shiller's Economic Theories

Traditionally speaking,an important theory in economics is the hypothesis of rational participants,which means the participants are absolute rational and the aim of their strategies is pursuing the maximum profits.Meanwhile competitions in the market are also completely fair.This premise could guarantee that the effectiveness of the following models and theories.Actually,in the real world,information that participants could get is incomplete;besides pursuing higher profits people should also try to maintain social relationships;meanwhile various psychological factors are still prevent people from complete rational strategies.Economics should be a practical subject instead of pure theories.Therefore,behavioral economics has caught the specialists' attention gradually because of the feature of practicalness.In the theories of behavioral economics,investors' economic behaviors cannot be absolute rational.They cannot predict the return of a certain strategy precisely because of the differences in natural talents and the limit information they can get.This paper will illustrates the maturity of the theory through the analytical of works written by Robert Shiller,the winner of the Nobel Economics Prize in 2013.As one of originators of behavioral economics,Professor Shiller finds the economics in the real world through observations of various behaviors of investors.At the first stage,Professor Shiller questioned the effectiveness of classical economic theories by analyzing the statistics he collected in questionnaires,math models and historical events.First,Professor Shiller tested the effectiveness of efficient market hypothesis by analyzing the data collected by questionnaire surveys and historical statistics.Professor Shiller combining psychological and sociology factors with his behavirol economics theories as his thoughts becoming mature.Based on his thoughts Shiller has made bold assumptions of the tendence of the economic development and precisely predicted the financial crisis in the United States.This essay is in the time order of the development in Shiller's theories.Furthermore,the directive significance of behavioral economics in Chinese markets will be introduced in the last part.