The New Financial Order: Risk in the 21st Century by Robert J. Shiller

The New Financial Order, written by Nobel Prize-winning economist Robert J. Shiller, examines the current state of world finance, the implications that it carries, and the necessary financial reforms needed to guarantee greater economic prosperity.

Modern economics has become very interconnected, and complex, with financial risks no longer confined to a single country or region but instead radiating all across the world. This has significant implications for long-term economic security. The New Financial Order takes a close look at the systemic risks that abound in the financial service industry, such as corporate governance failures, rating agency conflict of interest, unregulated investment funds and fragile mortgage markets, and offers potential solutions to these issues.

Shiller paints a vivid picture of these threats to economic security, drawing special attention to alarming issues such as the subprime mortgage crisis, which some experts have cited as a factor that contributed to the current economic downturn. He provides a synthesis of economic facts and theories, and then employs economic models to analyze possible solutions. His analysis proves quite insightful, as he carefully weaves an economically sound and yet humanitarian analysis of the current financial order.

Shiller notes that, in a new financial order, the principles of responsible corporate governance and investor protection must be respected. Advocating a “market discipline” rather than a purely free market approach, he calls for stronger government regulation of financial services firms and new restrictions on investment risk taking. His argument is that a safer and more stable financial order can and must be created, and that long-term economic security—especially for the most vulnerable—can only be achieved by doing so.

Shiller examines such related topics as financial education, limited risk insurance plans, and capital markets. For each, he proposes potential solutions to the current financial crisis. He also looks beyond the immediate problem of regulating the financial system and proposes reforms aimed at strengthening the global economy.

Ultimately, Shiller offers a comprehensive, balanced and well-argued case in favor of implementing a new global financial order. His efforts are particularly relevant given the economic turbulence of the post-financial crisis era. The New Financial Order serves as an important source of both economic knowledge and policy ideas. It is a must-read for anyone interested in understanding the current economic landscape and in finding solutions to the systemic financial risks that are currently holding back economic development in so many parts of the world.