Narrative Economics
How Stories Go Viral and Drive Major Economic Events
Robert J. Shiller · 2019 · Money & Investing
10 min · 11 chaptersNarrated in your voice
What it's about
Shiller argues that popular stories about the economy — narratives that spread person to person like epidemics — are themselves a driving force in economic events, not just commentary on them. Booms, panics, and recessions are shaped by which stories catch on, mutate, and fade. Economics, he says, should borrow contagion models from epidemiology to explain why certain beliefs about money, work, and value sweep through populations at particular moments and then disappear.
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Who it's for
- Investors trying to understand why markets swing on sentiment more than fundamentals - Policy makers and economists frustrated that standard models miss turning points - General readers curious how rumors, slogans, and folk beliefs shape recessions and booms
What’s inside
- 1Stories as Economic Forces1 min
Popular narratives about the economy are not mere reflections of economic reality but active causes of booms, panics, and recessions.
- 2Borrowing from Epidemiology1 min
Economic narratives spread and fade according to contagion dynamics analogous to disease epidemics, and can be modeled with similar mathematics.
- 3Why Some Stories Go Viral and Others Don't1 min
A narrative's economic power depends less on its truth than on its memorability, emotional resonance, and connection to identity or moral judgment.
- 4Recurring Narrative Constellations1 min
A small set of narrative templates recur across history, reappearing in different costumes to explain each new economic era.
- 5The Depression-Era Frugality Narrative1 min
The Great Depression's severity and duration were prolonged in part by a self-reinforcing narrative of thrift and fear that suppressed spending beyond what economic fundamentals required.
- 6Bimetallism and the Power of a Political Slogan1 min
A vivid narrative can decide elections and monetary policy even when few voters understand the technical substance behind it.
- 7Narratives and the Rise of Consumerism1 min
Twentieth-century narratives actively constructed the identity of the modern consumer, turning spending into a marker of social belonging rather than a neutral economic act.
- 8Data, Archives, and the Limits of Measurement1 min
Narrative economics can be studied empirically using historical text data, but measuring narrative prevalence and causal impact remains far less precise than measuring prices or output.
About Robert J. Shiller
Robert J. Shiller is a Yale economist and Nobel laureate (2013) known for work on market volatility and behavioral finance. He co-created the Case-Shiller Home Price Index and wrote 'Irrational Exuberance,' which anticipated the dot-com and housing crashes. Narrative Economics extends his long interest in psychology's role in markets.
