Working Papers

Robert Shiller’s Subprime Solution: The Democratisation of Finance or the Socialisation of Risk?

Following is a review of Robert Shiller’s The Subprime Solution, part of a longer review essay I’m preparing on ‘Depression Economics.’

Robert Shiller’s The Subprime Solution illustrates the extent to which New Deal mythology still has a stranglehold on contemporary thinking about the recent credit crisis.  Shiller romaticises the New Deal, maintaining that ‘somehow a spirit of cooperation and change developed… ultimately embodied in the New Deal; while there was great unrest, there was also a sense of positive institutional change and progress, which offset the despair of the Depression.  Hostility between labor and management, and between rich and poor, was tempered by the sense that we were all moving together toward a more enlightened world’ (p. 99).  Shiller argues against ‘waging war on the financial elite’ (p. 177) in response to the recent credit crisis.  But as Amity Shlaes demonstrates in her history of the Great Depression, the New Deal was anything but cooperative and enlightened and waged an indiscriminate war against all levels of society.

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posted on 22 September 2008 by skirchner in Economics, Financial Markets

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