Working Paper: NBER ID: w23075
Authors: Robert J. Shiller
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: narrative economics; economic fluctuations; epidemiology of narratives
JEL Codes: E00; E03; E30; G02; N1
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| narratives (Y40) | consumer behavior during recessions (D12) |
| consumer behavior during recessions (D12) | postponement of spending and hiring (E62) |
| postponement of spending and hiring (E62) | exacerbation of economic downturns (F44) |
| narratives (Y40) | severity of recessions (F44) |
| severity of recessions (F44) | prevalence and vividness of narratives (Z13) |
| narrative entrepreneurs (P12) | economic outcomes (F61) |
| contagion in narratives (Z13) | amplification of economic behaviors (E70) |