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Narrative Economics

58 Pages Posted: 11 Jan 2017 Last revised: 13 Jan 2017

Robert J. Shiller

Yale University - Cowles Foundation; National Bureau of Economic Research (NBER); Yale University - International Center for Finance

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Date Written: January 10, 2017

Abstract

This address considers the epidemiology of narratives relevant to economic fluctuations. The human brain has always been highly tuned towards narratives, whether factual or not, to justify ongoing actions, even such basic actions as spending and investing. Stories motivate and connect activities to deeply felt values and needs. Narratives “go viral” and spread far, even worldwide, with economic impact. The 1920-21 Depression, the Great Depression of the 1930s, the so-called “Great Recession” of 2007-9 and the contentious political-economic situation of today, are considered as the results of the popular narratives of their respective times. Though these narratives are deeply human phenomena that are difficult to study in a scientific manner, quantitative analysis may help us gain a better understanding of these epidemics in the future.

Keywords: Economic Fluctuations, Business Cycles, Story, Meme, Epidemic, SIR Model, Kermack and McKendrick, Multipliers, Bubbles, Depression of 1920, Profiteer, Great Depression, Stock Market Crash, 2008 Financial Crisis, Post-Truth

JEL Classification: E00, E03, E30, G02, N1

Suggested Citation

Shiller, Robert J., Narrative Economics (January 10, 2017). Cowles Foundation Discussion Paper No. 2069. Available at SSRN: https://ssrn.com/abstract=2896857

Robert Shiller (Contact Author)

National Bureau of Economic Research (NBER) ( email )

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Yale University - International Center for Finance ( email )

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Yale University - Cowles Foundation ( email )

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HOME PAGE: http://www.econ.yale.edu/~shiller/

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