Shiller on Trills

In this short piece, Robert Shiller explains one of the basic ideas of his work on macro markets:

The governments of the world should issue shares in their GDPs, securities that pay to investors as dividends a specified fraction of GDP, in perpetuity (or until the government buys them back on the open market). Governments need to end their historic reliance on debt financing: governments issuing shares in GDP is analogous to corporations issuing equity. My Canadian colleague Mark Kamstra and I propose issuing trillionth shares in GDP, and so to call these “Trills.” Last year, a U.S. Trill would have paid $15.09 in dividends, a Canadian Trill C$1.72. The dividends will change every year as GDP is announced, and predicting these changes will certainly interest investors, just as in the stock market. Governments can auction off Trills when current government debt comes due and needs to be refinanced, as part of a debt reduction program.

In this piece, Shiller focuses on the benefits of Trills as opposed to debt:

Substituting Trills for conventional debt helps deleverage the government, something whose importance has become very clear with the debt crisis in Europe.  The payments required of the government by the Trills is connected to the country’s ability to pay, measured by their GDP.

Trills could also be the foundation for many types of insurance products, for example, products that would pay off when GDP was down helping to alleviate business cycle issues. A market in Trills could also be used to make predictions and to judge policies (see Gurkaynak and Wolfers for an early test). Which policies will most increased the value of future trills? Similarly, by looking at how the market for trills changes as the Iowa Political Markets change we could identify which politicians are best for GDP (not just the equity and bond markets).

I featured Shiller’s work on macro markets in my book Entrepreneurial Economics: Bright Ideas from the Dismal Science. I think of this body of work as his most visionary and deserving of the Nobel.


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