The New Financial Order
Book

The New Financial Order

Risk in the Twenty-First Century

Robert J. Shiller
Princeton UP, 2003
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Editorial Rating

10
getAbstract International Book Award Winner 2003

Qualities

  • Innovative
  • Applicable

Recommendation

Economist Robert Shiller became a household name when he published his previous bestseller Irrational Exuberance just as the dot.com boom was peaking. In The New Financial Order, he capitalizes on his celebrity to put forward a thoughtful, detailed proposal for managing economic risks. This highly readable book portrays a future in which many serious individual financial risks are dispersed to savvy global investors, thanks to technology. Imagine violinists being able to insure their careers in addition to their Stradivarius instruments, developing countries securing generous loans from the first world by tying the repayment schedules to their future GDPs and a revamped tax system preventing the gap between rich and poor from widening. getAbstract suggests this book to risk-management professionals who want to step back and look at the big picture, as well as to anyone who has a stake in creating new financial products to meet twenty-first century needs.

Summary

Invisible Risks

Economic risks are not usually regarded as the subject of polite dinner-table conversation. Public officials who relentlessly stress the upside have conditioned us to believe that the economic progress of the twentieth century made finances less risky. Since many of these risks are long-term in nature, as well as difficult to explain and predict, they are not treated seriously by politicians, the media or the public.

For example, many people have health insurance, life insurance and property insurance, and thus consider themselves well protected against risk. But what about the risk that your chosen career specialty will not provide enough jobs in the future, or that global warming will wreak economic havoc on your region, or that a country your firm trades with will find its currency devalued due to war or a change in government? Though no insurance policies yet exist that cover such eventualities, the technology now exists to create them. In addition, companies today must manage the new risks promulgated by technology itself, including:

  • The replacement of human labor with sophisticated machinery and computers.
  • The ability of a few...

About the Author

Robert J. Shiller is the Stanley B. Resor Professor of Economics at Yale University. He is the author of Macro Markets, which won the first annual Paul A. Samuelson Award of TIAA-CREF, and Irrational Exuberance, which was a New York Times bestseller.

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