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The date is 5 October, 2011. Bob Shiller arrives 15 minutes late to class. He’s teaching his signature Behavioural Economics course and it’s the Fall Semester at Yale. I’m sitting in the class as one of the several World Fellows who’ve taken the course as part of our work during the semester we spend at the University.

The buzz about him that year was that he was up for the Nobel prize in economics—it took him two more years to win it, sharing it with Eugene Fama and Lars Peter Hansen—and I must admit I was a bit intimidated the first day I’d entered the lecture theatre a month earlier. I was course shopping then and had been in some classes of extreme alpha professors who ensured that the whole class knew it. It’s possible that all the sabre rattling impresses young undergrads, but mid-career such antics are just irritating. So it was a delight to find Shiller, the quintessential academic, with the air of being not always there, the last minute rush into class with dishevelled hair, the uncoordinated hunt for the mike, the look of perplexed anxiety when the slides wouldn’t come alive when they should. So he’s late. He complains about having a late morning. About not having enough self control to finish what he should have done the evening before. And then links it to the irrationality of human beings and the course that he teaches where ‘animal sprits’ matter more than equations that bind the world in rigid models. Models that, we’ve found, fail. More importantly, for me, Shiller was a reaffirmation about my views on finance. That finance’s role was to facilitate the workings of the world and not the other way around.

Two more stories from my trove of Shiller semester stories that I must share with Expense Account readers. The first happens during the third lecture. The Occupy Wall Street Movement is just about starting and the voices of the 99% against the 1% are gaining in strength. We’re discussing ‘fairness’. (Digression: for those wanting to understand more about this concept, here is a must watch video that shows that even monkeys figure out an unfair situation and get violent: http://www.youtube.com/watch?v=-dMoK48QGL8). The economics I learnt in my post grad school taught me that economic agents are rational and when demand rises prices will rise too, that markets will adjust and equilibrium will be reached. All in perfectly neat diagrams on the board. And in elaborate equations that proved the point. QED. I had instinctively recoiled from this orderly representation of the world that, anecdotally, I found chaotic and irrational. Issues of ‘fairness’ were not part of the courseware. So I’m delighted to be reading economics through this lens. Shiller asks the 60 odd students of economics in his class this question: “A hardware store has been selling snow shovels for $15. The morning after a large snowstorm, the store raises the price to $20. Please rate this action." Acceptable or unfair? About four-fifth think it is unfair. The response of this class, he said, falls into the pattern found over countless experiments across various groups. More than 80% people ever surveyed find this behaviour unfair and just about 20% find it acceptable. But according to economic theory prices rise when demand rises, so how did this become ‘unfair’? We’re just warming upto the class and suddenly he gets distracted. With an Indian movie! While talking about fairness and envy, he uses the example of Satyajit Ray’s ‘Distant Thunder’ (Ashani Sanket) to make a point about a speculative bubble in rice prices and hoarding. He has three stills from the film on his slides and while telling the story, he gets into the story and the rest of the lecture pretty much unravels and we have to rush through the rest of the slides. Unfair!

The second story is about Indian food. He loves not just to eat, but to cook it as well and admits to cooking curry once a week. So while leaving the university, I left my entire hoard of spices like haldi, heeng, zeera and garam masala for his use. It saved me having to lug them back and paying for excess baggage and I’m sure he got some nice Indian meals out of them!

Monika Halan works in the area of financial literacy and financial intermediation policy and is a certified financial planner. She is editor Mint Money, and Yale World Fellow 2011 and is on the board of FPSB India. She can be reached at expenseaccount@livemint.com

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