Robert J. Shiller
- Published in print:
- 1998
- Published Online:
- November 2003
- ISBN:
- 9780198294184
- eISBN:
- 9780191596926
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/0198294182.003.0004
- Subject:
- Economics and Finance, Macro- and Monetary Economics, Financial Economics
For the purpose of hedging risks to standards of living, the logical place to look first would be to markets for claims on total income; but such markets do not exist, and they have apparently never ...
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For the purpose of hedging risks to standards of living, the logical place to look first would be to markets for claims on total income; but such markets do not exist, and they have apparently never even been proposed. By making it possible to hedge the capital value of a stream of aggregate income, markets in perpetual claims or perpetual futures, long‐term swap markets, or retail analogues of these would facilitate management of the kind of longer‐run income risk that really matters to individuals and organizations; nations or other groupings of people could also use such markets to insure themselves against the prospect of a declining standard of living or the prospect of relative poverty. By hedging such risks, these macro markets would allow the natural tendency for convergence of incomes to reduce inequality of incomes, and might make significant progress toward equalizing wealth across nations, regions, categories of people, and individuals. There could be markets for hedging the risk of fluctuations in aggregate income, national income, or aggregate labour income for each country (or even region) of the world, and these could be divided up in different ways—although since most people's income is labour income, creating markets for claims on total income means for the most part creating markets for claims on labour income. The different sections of the chapter consider possible hedging arrangements in perpetual claims or perpetual futures markets for national incomes (market structures and associated institutions), whether income markets should be in actual or full‐employment income, and various measurement issues associated with incomes (including uncertainty).Less
For the purpose of hedging risks to standards of living, the logical place to look first would be to markets for claims on total income; but such markets do not exist, and they have apparently never even been proposed. By making it possible to hedge the capital value of a stream of aggregate income, markets in perpetual claims or perpetual futures, long‐term swap markets, or retail analogues of these would facilitate management of the kind of longer‐run income risk that really matters to individuals and organizations; nations or other groupings of people could also use such markets to insure themselves against the prospect of a declining standard of living or the prospect of relative poverty. By hedging such risks, these macro markets would allow the natural tendency for convergence of incomes to reduce inequality of incomes, and might make significant progress toward equalizing wealth across nations, regions, categories of people, and individuals. There could be markets for hedging the risk of fluctuations in aggregate income, national income, or aggregate labour income for each country (or even region) of the world, and these could be divided up in different ways—although since most people's income is labour income, creating markets for claims on total income means for the most part creating markets for claims on labour income. The different sections of the chapter consider possible hedging arrangements in perpetual claims or perpetual futures markets for national incomes (market structures and associated institutions), whether income markets should be in actual or full‐employment income, and various measurement issues associated with incomes (including uncertainty).
Robert J. Shiller
- Published in print:
- 1998
- Published Online:
- November 2003
- ISBN:
- 9780198294184
- eISBN:
- 9780191596926
- Item type:
- book
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/0198294182.001.0001
- Subject:
- Economics and Finance, Macro- and Monetary Economics, Financial Economics
This book, which is part of the distinguished Clarendon Lectures in Economics series, puts forward a unique and authoritative set of detailed proposals for establishing new markets for the management ...
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This book, which is part of the distinguished Clarendon Lectures in Economics series, puts forward a unique and authoritative set of detailed proposals for establishing new markets for the management of the biggest economic risks facing governments and society. Robert Shiller argues that we have largely the wrong financial markets, and that establishing new ones may fundamentally alter and diminish international economic fluctuations (and thus enable better risk management) and reduce the inequality of incomes. Shiller argues that although some risks, such as natural disaster or temporary unemployment, are shared by society, most risks are borne by the individual, and standards of living are determined by luck. He investigates whether a new technology of markets could make risk sharing possible and shows how new contracts could be designed to hedge all manner of risks to the individual's living standards. He proposes new international markets for perpetual claims on national incomes, and on components and aggregates of national incomes, concluding that these markets may well dwarf our stock markets in their activity and significance. He also argues for new liquid international markets for residential and commercial property. Establishing such unprecedented new markets presents some important technical problems that Shiller attempts to solve with proposals for implementing futures markets on perpetual claims on incomes, and for the construction of index numbers for cash settlement of risk management contracts. These new markets could fundamentally alter and diminish international economic fluctuations, and reduce the inequality of incomes around the world. Much of the book is technical, and it is intended mostly for economists, contract designers at futures and options exchanges, originators of swaps and other financial deals, and designers of retail products associated with risk management (such as insurance, pension plans, and mortgages). However, the material within the book is mostly arranged so that a non‐technical reader can follow the broad themes, and until Ch. 6, most of the technical material is relegated to appendices.Less
This book, which is part of the distinguished Clarendon Lectures in Economics series, puts forward a unique and authoritative set of detailed proposals for establishing new markets for the management of the biggest economic risks facing governments and society. Robert Shiller argues that we have largely the wrong financial markets, and that establishing new ones may fundamentally alter and diminish international economic fluctuations (and thus enable better risk management) and reduce the inequality of incomes. Shiller argues that although some risks, such as natural disaster or temporary unemployment, are shared by society, most risks are borne by the individual, and standards of living are determined by luck. He investigates whether a new technology of markets could make risk sharing possible and shows how new contracts could be designed to hedge all manner of risks to the individual's living standards. He proposes new international markets for perpetual claims on national incomes, and on components and aggregates of national incomes, concluding that these markets may well dwarf our stock markets in their activity and significance. He also argues for new liquid international markets for residential and commercial property. Establishing such unprecedented new markets presents some important technical problems that Shiller attempts to solve with proposals for implementing futures markets on perpetual claims on incomes, and for the construction of index numbers for cash settlement of risk management contracts. These new markets could fundamentally alter and diminish international economic fluctuations, and reduce the inequality of incomes around the world. Much of the book is technical, and it is intended mostly for economists, contract designers at futures and options exchanges, originators of swaps and other financial deals, and designers of retail products associated with risk management (such as insurance, pension plans, and mortgages). However, the material within the book is mostly arranged so that a non‐technical reader can follow the broad themes, and until Ch. 6, most of the technical material is relegated to appendices.
Anthony B. Atkinson
- Published in print:
- 2013
- Published Online:
- January 2014
- ISBN:
- 9780199931392
- eISBN:
- 9780199345731
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780199931392.003.0003
- Subject:
- Philosophy, Moral Philosophy
Health inequalities are at the forefront of public debate in many countries, including the United States and the European Union. Governments have in recent years set in place programmes to tackle ...
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Health inequalities are at the forefront of public debate in many countries, including the United States and the European Union. Governments have in recent years set in place programmes to tackle health inequalities. However, the current economic and fiscal crisis is threatening progressive health policies. The aim of this paper is to show how a deeper understanding of the issues of measuring inequality helps us develop policy responses. The paper starts from the parallel with the measurement of income inequality, but argues that the dimension of health needs different treatment. In the same way, we should not treat health and income symmetrically in indicators, such as the Human Development Index, that seek to combine income and health in a single performance measure. The paper then examines the inter-relation between income and health: the issue of health “inequity”. The nature of the health gradient however needs to be carefully established, since different forms have different implications for policy. It goes on to widen the scope of the discussion to consider the role of health-related social transfers and the distribution of the benefits from public health programmes. The final part addresses issues raised for health policy by the economic crisis.Less
Health inequalities are at the forefront of public debate in many countries, including the United States and the European Union. Governments have in recent years set in place programmes to tackle health inequalities. However, the current economic and fiscal crisis is threatening progressive health policies. The aim of this paper is to show how a deeper understanding of the issues of measuring inequality helps us develop policy responses. The paper starts from the parallel with the measurement of income inequality, but argues that the dimension of health needs different treatment. In the same way, we should not treat health and income symmetrically in indicators, such as the Human Development Index, that seek to combine income and health in a single performance measure. The paper then examines the inter-relation between income and health: the issue of health “inequity”. The nature of the health gradient however needs to be carefully established, since different forms have different implications for policy. It goes on to widen the scope of the discussion to consider the role of health-related social transfers and the distribution of the benefits from public health programmes. The final part addresses issues raised for health policy by the economic crisis.
Yue Chim Richard Wong
- Published in print:
- 2017
- Published Online:
- January 2018
- ISBN:
- 9789888390625
- eISBN:
- 9789888390373
- Item type:
- chapter
- Publisher:
- Hong Kong University Press
- DOI:
- 10.5790/hongkong/9789888390625.003.0025
- Subject:
- Economics and Finance, Public and Welfare
Housing prices have risen in the United States and Hong Kong mostly because of the high regulation costs of development. In each of the developed countries, a very large array of complex regulations ...
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Housing prices have risen in the United States and Hong Kong mostly because of the high regulation costs of development. In each of the developed countries, a very large array of complex regulations has made development difficult and effectively prevented housing supply from responding to demand. The problem is not market competition, but government regulations that prevent markets from functioning properly. The rising ratio of capital to income is almost entirely due to the rise of housing. What begins initially as inequality in housing wealth gets transmitted into the next generation and is transformed into other forms of inequality, in particular inequality in opportunities, with other distributional consequences.Less
Housing prices have risen in the United States and Hong Kong mostly because of the high regulation costs of development. In each of the developed countries, a very large array of complex regulations has made development difficult and effectively prevented housing supply from responding to demand. The problem is not market competition, but government regulations that prevent markets from functioning properly. The rising ratio of capital to income is almost entirely due to the rise of housing. What begins initially as inequality in housing wealth gets transmitted into the next generation and is transformed into other forms of inequality, in particular inequality in opportunities, with other distributional consequences.