Shiller explains that the human brain is built around narratives. These narratives affect people’s actions independently of whether they are factual or not. When narratives “go viral” they have an economic impact as they influence actions such as spending and investing. So far, economists have missed the stories behind economic fluctuations because their tool kit could not incorporate them. Research on narrative economics, Shiller argues, could lead to a better understanding of economic phenomena.
“The very name “Great Recession” could be interpreted as evidence of a narrative epidemic.” In 1978 Otto Eckstein tried to attach the name “Great Recession” to the severe recession of 1974-75 and in 1982 Joseph Granville tried to do the same for the 1981-1982 recession. Neither times the term entered people’s narrative. “It was different, however, in 2007-9. Nouriel Roubini first referred to the “Great Recession of 2007” in late 2006, a year before the recession had started. But it took several more years, until 2009, for the term to catch on and go viral”
Narrative Economics
Author: Robert Shiller
From: Yale UniversityA shorter version of Shiller’s paper
Economics and the human instinct for storytelling
By: Robert Shiller
“The very name “Great Recession” could be interpreted as evidence of a narrative epidemic.” In 1978 Otto Eckstein tried to attach the name “Great Recession” to the severe recession of 1974-75 and in 1982 Joseph Granville tried to do the same for the 1981-1982 recession. Neither times the term entered people’s narrative. “It was different, however, in 2007-9. Nouriel Roubini first referred to the “Great Recession of 2007” in late 2006, a year before the recession had started. But it took several more years, until 2009, for the term to catch on and go viral”
Narrative Economics
Author: Robert Shiller
From: Yale UniversityA shorter version of Shiller’s paper
Economics and the human instinct for storytelling
By: Robert Shiller
