About four months ago in this very room, Nobel laureate Robert Shiller presented the third edition of his book “Irrational Exuberance”, earlier editions of which had already pointed to the misguided policies of financial re-regulation in advance of the crisis long before policymakers, markets, and the general public even became aware of them.
1 His simple message this time was that irrational exuberance is still a defining feature of how financial markets function. Investors still follow cycles of mania and crashes, rather than rationally calculating the probabilities of all relevant scenarios – and rather than considering the negative externalities of their transactions. Full stop.