Available on Amazon Kindle and forthcoming in audio edition

The subprime mortgage crisis has already wreaked havoc on the lives of millions of people and now it threatens to derail the U.S. economy and economies around the world. In this trenchant book, best-selling economist Robert Shiller reveals the origins of this crisis and puts forward bold measures to solve it. He calls for an aggressive response — a restructuring of the institutional foundations of the financial system that will not only allow people once again to buy and sell homes with confidence, but will create the conditions for greater prosperity in America and throughout the deeply interconnected world economy.

Shiller blames the subprime crisis on the irrational exuberance that drove the economy's two most recent bubbles — in stocks in the 1990s and in housing between 2000 and 2007. He shows how these bubbles led to the dangerous overextension of credit now resulting in foreclosures, bankruptcies, and write-offs, as well as a global credit crunch. To restore confidence in the markets, Shiller argues, bailouts are needed in the short run. But he insists that these bailouts must be targeted at low-income victims of subprime deals. In the longer term, the subprime solution will require leaders to revamp the financial framework by deploying an ambitious package of initiatives to inhibit the formation of bubbles and limit risks, including better financial information; simplified legal contracts and regulations; expanded markets for managing risks; home equity insurance policies; income-linked home loans; and new measures to protect consumers against hidden inflationary effects.

Winner of the Financial Times/getAbstract Business Book Award, 2003

In his best-selling Irrational Exuberance, Robert Shiller cautioned that society's obsession with the stock market was fueling the volatility that has since made a roller coaster of the financial system. Less noted was Shiller's admonition that our infatuation with the stock market distracts us from more durable economic prospects. These lie in the hidden potential of real assets, such as income from our livelihoods and homes. But these ''ordinary riches,'' so fundamental to our well-being, are increasingly exposed to the pervasive risks of a rapidly changing global economy. This compelling and important new book presents a fresh vision for hedging risk and securing our economic future.

Shiller describes six fundamental ideas for using modern information technology and advanced financial theory to temper basic risks that have been ignored by risk management institutions — risks to the value of our jobs and our homes, to the vitality of our communities, and to the very stability of national economies. Informed by a comprehensive risk information database, this new financial order would include global markets for trading risks and exploiting myriad new financial opportunities, from inequality insurance to intergenerational social security. Just as developments in insuring risks to life, health, and catastrophe have given us a quality of life unimaginable a century ago, so Shiller's plan for securing crucial assets promises to substantially enrich our condition.

Once again providing an enormous service, Shiller gives us a powerful means to convert our ordinary riches into a level of economic security, equity, and growth never before seen. And once again, what Robert Shiller says should be read and heeded by anyone with a stake in the economy.

Endorsements:

"Robert Shiller's book, The New Financial Order, is an important work on a significant topic." — Joseph E. Stiglitz, author of Globalization and its Discontents, and Nobel Laureate in Economics

"As the worldly philosophers of the past affirmed, the goal of economics is to improve the way society functions. In The New Financial Order, Robert Shiller joins this proud tradition by directing his brilliant economic skills toward the creation of financial institutions designed to reduce the risks an unknown future visits on most members of our society and others. Shiller's imaginative and compelling analysis will appeal to all readers who share his passion for initiating not only a richer, but a better, century." — Peter L. Bernstein, author of Against the Gods: The Remarkable Story of Risk

"Bob Shiller has done it again. In The New Financial Order, he tells how innovations in risk management can better the lives not just of the rich, but of the poor and the middle class, insuring against the most serious risks that face us all. There is something for everyone in this brilliant book. It foretells where financial markets are headed in the coming century." — George A. Akerlof, Goldman Professor of Economics, University of California, Berkeley, and Nobel Laureate in Economics

"This is one of those rare books that really captures the imagination by offering fresh ideas, that makes you think and at the same time is rigorous and serious. It's hard to exaggerate how unusual and exciting this is to a reader. One of the book's real joys is the way it captures the passion of economics for making people's lives better." — Diane Coyle, author of The Weightless World and Sex, Drugs, and Economics

"Shiller is a real visionary, and this book will be widely read and discussed. It suggests a remedy for a situation begging to be remedied: we live in an age of great material wealth, but equally great economic insecurity." — Herbert Gintis, University of Massachusetts, Amherst, and the Santa Fe Institute

Translations:
Chinese simplified characters: Chinese People's University Press/Liang Jing Publishing Studio, China
Chinese complex characters: China Times Publishing Company, Taiwan
German: Campus Verlag, Germany
Italian: Il Sole 24 Ore, Italy
Japanese: Nikkei, Japan
Korean: Min Media, Korea
Spanish: Turner Publications Spain/Oceana Mexico

Winner of the COMMONFUND PRIZE, 2000.

This book is a broad study, drawing on a wide range of published research and historical evidence, of the enormous stock market boom that started around 1982 and picked up incredible speed after 1995. Although it takes as its specific starting point this ongoing boom, it places it in the context of stock market booms generally, and it also makes concrete suggestions regarding policy changes that should be initiated in response to this and other such booms. The book argues that the boom represents a speculative bubble, not grounded in sensible economic fundamentals.   Part one of the book considers structural factors behind the boom. A list of twelve precipitating factors that appear to be its ultimate causes is given. Amplification mechanisms, naturally-occurring Ponzi processes, that enlarge the effects of these precipitating factors, are described. Part Two discusses cultural factors, the effects of the news media, and of "new era" economic thinking. Part Three discusses psychological factors, psychological anchors for the market and herd behavior. Part Four discusses attempts to rationalize exuberance: efficient markets theory and theories that investors are learning. Part Five presents policy options and actions that should be taken. Hardcover 296 pages, paperback 304 pages. Contents, Preface and Sample Chapter and Online Data.

Stock market data used in my book, Irrational Exuberance, hardcover Princeton University Press 2000, paperback Broadway Books 2001: html file, Excel.xls (2.1) (Zip file).

Other editions:
Scribe Publications paperback 2000 (Australia and New Zealand)
Princeton University Press paperback 2001 (UK only)
Audible.com, audio edition 2000

Translations:
Arabic: Obeikan Publishers, Saudi Arabia
Chinese (simplified characters): Chinese People's University Press, China/Liang Jing Publishing Studio
Chinese (complex characters): China Times Publishers, Taiwan
French: Valor editions, France
German: Campus Verlag, Germany
Greek: Livanis Publications, Greece
Hungarian: Alinea, Hungary
Italian: Il Mulino, Italy
Korean: Maeil Business Newspapers, Korea
Japanese: Diamond, Japan
Macedonian: Securities and Exchange Commission, Macedonia
Portuguese: Makron, Brazil
Spanish: Turner Publications, Spain/Oceana Mexico
Turkish: Rota Publishers, Turkey

Hardcover, Oxford University Press, 1993

Paperback, Oxford University Press, 1998

Winner of the First PAUL A. SAMUELSON Award, TIAA-CREF, 1996.

It is proposed that a new class of markets, macro markets, markets for claims on aggregate income and service flows, be established. These markets would help people to manage the biggest economic risks facing society. Our existing financial markets are inadequate to deal with such risks. Our stock markets are markets for claims on corporate dividends, and yet the latter are only a few percent of national incomes, only 3 percent in the United States. The proposal here is to establish liquid international markets for claims on the other 97 percent. These would include markets for national incomes, components and aggregates of national incomes, and real estate. Establishing such unprecedented new markets presents some technical problesm which this book attempts to solve. There are proposals for perpetual futures market design, and for new index number construction methods for cash settlement of contracts. [254 pages]

Contents: 1. Introduction, 2. Psychological Barriers, 3. Mechanisms for Hedging Long Streams of Income, 4. National Income and Labor Income Markets, 5. Real Estate and Other Markets, 6. The Construction of Index Numbers for Contract Settlement, 7. Index Numbers: Issues and Alternatives, 8. The Problem of Index Revisions, 9. Making It Happen, Notes, References, Index

Translations:
Chinese Simplified Characters: Academic Works in Economics Series, Oxford University Press, United Kingdom

The origins of price movements are poorly known in all speculative markets: markets for corporate stocks, bonds, homes, land, commercial structures, commodities, collectables, and foreign exchange. Why do stock prices often change up or down 20% in a year's time? Why do long term bond prices sometimes change up or down as much? Why do we sometimes find "hot" markets for homes, with prices sometimes jumping or more 20% in a year, after years of stable prices? The book presents basic research on the ultimate causes of price volatility in speculative markets, on the causes that make good economic sense and on the causes that are psychological or sociological in origin. The research, conducted over the last dozen years, includes both my own work and joint research with John Y. Campbell, Karl E. Case, Sanford J. Grossman, and Jeremy J. Siegel. About two thirds of the book consists of previously published articles. [464 pages] Chapter 26 and Online Data

Contents:  Introduction, 1. Stock Prices and Social Dynamics, 2. Fashions, Fads and Bubbles in Financial Markets, 3.The Stock Market: Overview, 4. Stock Market Volatility, An Introductory Survey, 5. Do Stock Prices Move Too Much to be Justified by Subsequent Changes in Dividends, 6. The Use of Volatility Measures in Assessing Market Efficiency, 7. The Probability of Gross Violations of a Present Value Variance Inequality, 8. Stock Prices, Earnings, and Expected Dividends, 9. The Dividend-Ratio Model and Expected Dividends, 10. Comovements in Stock Prices and Comovements in Dividends, 11. Factors and Fundamentals, 12. The Bond Market: Overview, 13. Bond Market Volatility: An Introductory Suvery, 14. The Gibson Paradox and Historical Movements in Long-Term Interest Rates, 15. The Volatility of Long-Term Interest Rates and Expectations Models of the Term Structure, 16. Cointegration and Tests of Present Value Models, 17. The Real Estate Market: Overview, 18. The Efficiency of the Market for Single Family Homes, 19. The Aggregate Economy, Overview, 20. Ultimate Sources of Aggregate Variability, 21 The Determinants of the Variability of Stock Market Prices, 22. Popular Models and Investor Behavior, Overview, 23. Investor Behavior in the October 1987 Stock Market Crash: Survey Evidence, 24. The Behavior of Home Buyers in Boom and Post-Boom Markets, 25. Concluding Notes, 26, Data Series, Author Index, Subject Index

Translations:
Chinese: Chinese People's University Press, China