Summary of 1. Introduction and What this Course Will Do for You and Your Purposes

Summary of "Introduction and What this Course Will Do for You and Your Purposes"

Speaker: Professor Robert Shiller

Main Ideas and Concepts

• Course Overview:
  • The course, Economics 252: Financial Markets, is an undergraduate class taught by Professor Robert Shiller.
  • It requires only introductory economics as a prerequisite.
  • The focus is on real-world financial markets as a fundamental pillar of society, not just trading or making money.
  • Finance is about allocating resources over time and space, incentivizing productive activity, sponsoring ventures, managing risks, and ensuring fairness.
  • The course covers a broad interpretation of finance: banking, insurance, securities, derivatives, financial crises, and future trends.
  • Although U.S.-centric, the course incorporates a global perspective due to its international audience (Open Yale initiative).
• Philosophical and Practical Approach:
  • The course balances philosophical underpinnings with detailed, practical knowledge.
  • Emphasis on understanding institutions and history rather than heavy mathematics.
  • Students will learn the "language" of finance—its details and technical terms are important.
  • The course is self-contained but complemented by a more mathematical course (Economics 251 by John Geanakoplos).
• Relation to Other Courses:
  • Economics 251 focuses on financial theory with mathematical rigor.
  • Econ 252 (this course) emphasizes real-world applications and institutions.
  • Six review sessions with teaching assistants will provide additional mathematical insights.
• Purpose of the Course:
  • Designed to prepare students for real-world engagement, not just finance careers.
  • Finance is fundamental to many fields and life goals; everyone benefits from understanding it.
  • Finance is a technology for enabling societal progress, not merely a tool for making money.
  • The course encourages students to find a moral and purposeful approach to finance.
• Finance and Society:
  • Finance is integral to modern capitalism and global economic growth.
  • The course challenges the stereotype of finance as purely money-grubbing.
  • It explores the ethical dimension of wealth and finance, including philanthropy.
  • Discussion of Andrew Carnegie’s The Gospel of Wealth and the moral obligation of the wealthy to give back.
  • Recognition of the concentration of wealth and the need for responsible stewardship.
• Career and Job Market Insights:
  • Finance jobs are numerous and growing compared to many other fields.
  • The richest people often come from finance-related sectors rather than entertainment or sports.
  • Finance involves organizing large-scale enterprises, making deals, and managing capital.
  • Wealth accumulation raises questions about purpose and social responsibility.
• Course Materials:
  • Primary textbook: by Frank Fabozzi, Franco Modigliani, and Frank Jones.
  • Professor Shiller is also authoring a book titled Finance and the Good Society (in progress), emphasizing finance’s role in building a just society.
• Guest Speakers:
  • David Swensen (Yale’s Chief Investment Officer) – example of a morally driven finance professional.
  • Maurice "Hank" Greenberg (Founder of AIG) – a figure with a complex but significant role in finance and philanthropy.
  • Laura Cha (Hong Kong financial regulator) – representing the regulatory perspective.
• Teaching Assistants and Their Focus Areas:
  • Oliver Bunn (Germany) – head TA.
  • Elan Fuld (USA) – studies economics applied to pizza delivery.
  • Bige Kahraman (Turkey) – specializes in Behavioral Finance, studying mutual funds and fee structures.
  • Bin Li (Beijing) – focuses on Leveraged Asset Pricing and Behavioral Finance.
• Course Outline Highlights:
  • Lecture 2: Risk and financial crises, including the 2008 crisis and comparisons to the Great Depression.
  • Lecture 3: Finance as a technology and its future.
  • Lecture 4: Portfolio diversification and the Capital Asset Pricing Model.
  • Lecture 5: Insurance and its societal importance.
  • Lecture 6: Efficient Markets Theory and its limitations.
  • Lecture 7: Debt markets and borrowing.
  • Lecture 8: Stock markets and their role in organizing enterprises.
  • Lecture 9: Real estate markets and their role in financial crises.
  • Lecture 10: Behavioral Finance—psychology in finance.
  • Lecture 12: Banking, credit expansion, and regulation (Basel III).
  • Lecture 13-14: Forward, futures, and options markets.
  • Lecture 15: Monetary policy and central banks.
  • Lecture 16: Investment banking and regulatory reforms (e.g., Dodd-Frank).
  • Lecture 17: Professional money managers and institutional investors’ responsibilities.
  • Lecture 18: Exchanges, brokers, electronic trading.
  • Lecture 19: Public and nonprofit finance.
  • Lecture 20: Finding your purpose in finance—

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