, Columnist
Shiller Sees Only Rational Exuberance This Time
How far lower rates justify higher stock valuations isn’t straightforward, though.
He knows how to spot them.
Photographer: IAN KINGTON/AFP/Getty Images
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The two deadliest words in economics are in Latin: ceteris paribus, or all else equal. In natural sciences like physics and chemistry, researchers can construct experiments to ensure that all else is equal. Economists can’t do that. So when building models, they generally include the crucial words ceteris paribus. This is an assumption, which may well not cohere in the real world.