markets, welfare, case-shillerRobert Shiller has laid out a bold plan for improving average household welfare by reducing exposure to macro risks via derivatives. The plan was originally laid out in his book, The New Financial Order: Risk in the 21st Century, and is being actively promoted by his company, MacroMarkets. So far, he has managed to create a very successful house price index with help from Karl Case, the S&P Case-Shiller index. However, derivatives based on this index, currently trading at the CME, have failed to catch on with investors. Given the convincing case for these (and other) derivatives laid out in his book and by his company, you might expect investors to flock to these new derivatives in droves. Why aren’t these derivatives catching on? Is there a problem with the economics behind his argument?
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