I have been reading Professor Robert Shiller's underpublicised The New Financial Order: How to Manage Risk in the 21st Century, conceived in the interim between recent work and Irrational Exuberance. As I will lay out in a future post, Shiller sees enormous potential in human financial engineering to spur wide-ranging risk management technology in order to drive commercial and social innovation.
According to Schiller, risk professionals and financiers need to adopt a more comprehensively human approach to financial development and risk-taking. In the process, Shiller focusses on the capacity for Human Computer Interaction theory ("HCI") and human factor engineering to explore the most intractable human problems, and how to solve them from a risk perspective.
An example, which I am eager to explore in future posts, is Shiller's concept of 'livelihood loans' to enable creative career pursuits and more diverse risk management technologies thereby reducing exposure to the elements of stock market volatility and credit risk.
Grounded upon a firm 'psychological footing', Shiller, in his short book, hopes to investigate human-interactive means of using technology to control for pyschological bias. In so doing, Shiller's propounds the theory of finance in a good society by searching for appropriate psychological "framing" to incorporate human feeling and social aspiration.
The end-goal, Shiller posits, is a return to the power of primitives, or Universals such as Justice, Fairness and Prosperity to engender 'contracts freely chosen by enlightened society'.
A financier's pipedream, or the key to human growth?
I will explore these questions in a future post....
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