NEW HAVEN, Conn. • A Yale professor who was among three Americans who won the Nobel prize for economics said Monday that rising economic inequality in the United States and other countries is the most important problem.
Robert Shiller, known for developing a widely used measure of home prices, was awarded the Nobel Memorial Prize in Economic Science on Monday. The Royal Swedish Academy of Sciences honored Shiller and Eugene Fama and Lars Peter Hansen, who are associated with the University of Chicago, "for their empirical analysis of asset prices."
Shiller, an economist famous for having warned about bubbles in technology stocks and housing, said inequality has been worsening for decades. He said he supports having a contingency plan in place now to raise taxes on the rich if inequality gets worse.
"The most important problem that we are facing now today, I think, is rising inequality in the United States and elsewhere in the world," Shiller said.
On the government shutdown in Washington, Shiller said he doesn't think it will have a major lasting impact on the markets.
"I'm thinking that this crisis will likely be resolved," Shiller said. "We won't see a default. Even if we do, it will be for one day or something like that. Even if it's longer, I think it's not the end of the world."
He said markets could drop like they did when the U.S. debt was downgraded two years ago, but he noted that they bounced back.
Shiller said the stock market is "rather highly priced," but he said, "I don't think one should view it with alarm." He said U.S. home prices still aren't back at their previous levels.
"They've got a long way to go before they're like they were in 2006," Shiller said.
Regulated properly, finance is "at the core of our civilization," said Shiller, who developed the Case-Shiller index, a leading measure of U.S. housing prices, with Wellesley College economist Karl Case. "I'm glad we're getting recognized for that fact," he said.
Shiller said the reputation of finance has taken a beating after the worst recession in decades.
"I think that finance is a framework in which many good things are done," he said. "It seems to some people it's selfish and money grubbing. It doesn't really have to be that way."
For example, he said, many students from other countries are able to study in the United States because of financial aid made possible by investments.
He said the public has learned from the financial crisis that gripped the economy immediately after the start of the recession in 2008. The Consumer Financial Protection Bureau established as a result of the recession is holding finance to higher standards, he said.
It's the second Nobel prize to a Yale faculty member in a week. James Rothman shared a Nobel in medicine last Monday.
Shiller said he was surprised to win the honor: "People told me they thought I might win. I discounted it. Probably hundreds have been told that."
Shiller said when he asked his brother in Detroit if he heard the news, he replied, "The Tigers lost."