The difficulty in taking away the punch bowl when the party starts getting interesting

Googling around I stumbled across this piece by Robert Shiller in the New York Times recently. It's really about the problem of group-think in organisations like the Fed, but I was struck by the comments he makes about his own desire not to be seen as too much of a nutter when speaking out about the bubbles in first the stockmarket, and later the housing market.

"From my own experience on expert panels, I know firsthand the pressures that people — might I say mavericks? — may feel when questioning the group consensus."

"I was connected with the Federal Reserve System as a member the economic advisory panel of the Federal Reserve Bank of New York from 1990 until 2004, when the New York bank’s new president, Timothy F. Geithner, arrived. That panel advises the president of the New York bank, who, in turn, is vice chairman of the Federal Open Market Committee, which sets interest rates. In my position on the panel, I felt the need to use restraint. While I warned about the bubbles I believed were developing in the stock and housing markets, I did so very gently, and felt vulnerable expressing such quirky views. Deviating too far from consensus leaves one feeling potentially ostracized from the group, with the risk that one may be terminated."

As I've said quite a few times before, I like the fact that Shiller pays a lot of attention to the psychological factors associated with markets. By that I don't just mean the psychology behind market transactions, but also (as above) the psychology of financial policy, and the psychological effects of economic events. His stuff is well worth reading.