Nobel laureate and Yale professor of economics Robert Shiller is almost the first to say that genius and clairvoyance are two entirely different things. The job of an economist is to speak about what he or she can discern from the data, and to prepare others--if they'll accept it--for what may happen amidst a cloud of uncertainty.

Shiller's strong pronouncement here is about the risk of assuming that "lift off" for the Federal Reserve in terms of monetary policy intended to make borrowing more expensive may--or may not--have the consequences many many observers predict. Shiller writes:

We don’t know what will happen if and when the Fed raises rates. And the problem becomes much more complicated when you include human psychology in your economic analysis, as we try to do in the emerging field of behavioral finance. In fact, from a psychological perspective, the whole efficient markets idea that only real surprises matter and there should be no reaction to “news” that is well known in advance is a little off base. People often don’t know in advance how they will react until news becomes real.

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