Narrative Economics

"In a world in which internet troll farms attempt to influence foreign elections, can we afford to ignore the power of viral stories to affect economies? In this groundbreaking book, Nobel Prize-winning economist and New York Times bestselling author Robert Shiller offers a new way to think about the economy and economic change. Using a rich array of historical examples and data, Shiller argues that studying popular stories that affect individual and collective economic behavior--what he calls "narrative economics"--has the potential to vastly improve our ability to predict, prepare for, and lessen the damage of financial crises, recessions, depressions, and other major economic events. Spread through the public in the form of popular stories, ideas can go viral and move markets--whether it's the belief that tech stocks can only go up, that housing prices never fall, or that some firms are too big to fail. Whether true or false, stories like these--transmitted by word of mouth, by the news media, and increasingly by social media--drive the economy by driving our decisions about how and where to invest, how much to spend and save, and more. But despite the obvious importance of such stories, most economists have paid little attention to them. Narrative Economics sets out to change that by laying the foundation for a way of understanding how stories help propel economic events that have had led to war, mass unemployment, and increased inequality."--

From Nobel Prize–winning economist and New York Times bestselling author Robert Shiller, a groundbreaking account of how stories help drive economic events—and why financial panics can spread like epidemic viruses Stories people tell—about financial confidence or panic, housing booms, or Bitcoin—can go viral and powerfully affect economies, but such narratives have traditionally been ignored in economics and finance because they seem anecdotal and unscientific. In this groundbreaking book, Robert Shiller explains why we ignore these stories at our peril—and how we can begin to take them seriously. Using a rich array of examples and data, Shiller argues that studying popular stories that influence individual and collective economic behavior—what he calls "narrative economics"—may vastly improve our ability to predict, prepare for, and lessen the damage of financial crises and other major economic events. The result is nothing less than a new way to think about the economy, economic change, and economics. In a new preface, Shiller reflects on some of the challenges facing narrative economics, discusses the connection between disease epidemics and economic epidemics, and suggests why epidemiology may hold lessons for fighting economic contagions.

"Economists have long based their forecasts on financial aggregates such as price-earnings ratios, asset prices, and exchange rate fluctuations, and used them to produce statistically informed speculations about the future--with limited success. Robert Shiller employs such aggregates in his own forecasts, but has famously complemented them with observations about the influence of mass psychology on certain events. This approach has come to be known as behavioral economics. How can economists effectively capture the effects of psychology and its influence on economic events and change? Shiller attempts to help us better understand how psychology affects events by explaining how popular economic stories arise, how they grow viral, and ultimately how they drive economic developments. After defining narrative economics in the book's preface with allusions to the advent of both the Great Depression and to World War II, Shiller presents an example of a recent economic narrative gone viral in the story of Bitcoin. Next, he explains how narrative economics works with reference to how other disciplines incorporate narrative into their analyses and also to how epidemiology explains how disease goes viral. He then presents accounts of recurring economic narratives, including the gold standard, real estate booms, war and depression, and stock market booms and crashes. He ends his book with a blueprint for future research by economists on narrative economics." -- Provided by publisher.

From acclaimed economists George Akerlof and Robert Shiller, the case for why government is needed to restore confidence in the economy The global financial crisis has made it painfully clear that powerful psychological forces are imperiling the wealth of nations today. From blind faith in ever-rising housing prices to plummeting confidence in capital markets, "animal spirits" are driving financial events worldwide. In this book, acclaimed economists George Akerlof and Robert Shiller challenge the economic wisdom that got us into this mess, and put forward a bold new vision that will transform economics and restore prosperity. Akerlof and Shiller reassert the necessity of an active government role in economic policymaking by recovering the idea of animal spirits, a term John Maynard Keynes used to describe the gloom and despondence that led to the Great Depression and the changing psychology that accompanied recovery. Like Keynes, Akerlof and Shiller know that managing these animal spirits requires the steady hand of government—simply allowing markets to work won't do it. In rebuilding the case for a more robust, behaviorally informed Keynesianism, they detail the most pervasive effects of animal spirits in contemporary economic life—such as confidence, fear, bad faith, corruption, a concern for fairness, and the stories we tell ourselves about our economic fortunes—and show how Reaganomics, Thatcherism, and the rational expectations revolution failed to account for them. Animal Spirits offers a road map for reversing the financial misfortunes besetting us today. Read it and learn how leaders can channel animal spirits—the powerful forces of human psychology that are afoot in the world economy today. In a new preface, they describe why our economic troubles may linger for some time—unless we are prepared to take further, decisive action.

Since 1946, Henry Hazlitt's bestselling Economics in One Lesson has popularized the belief that economics can be boiled down to one simple lesson: market prices represent the true cost of everything. But one-lesson economics tells only half the story. It can explain why markets often work so well, but it can't explain why they often fail so badly--or what we should do when they stumble. Quiggin teaches both lessons, offering an introduction to the key ideas behind the successes--and failures--of free markets. He explains why market prices often fail to reflect the full cost of our choices to society as a whole. Two-lesson economics means giving up the dogmatism of laissez-faire as well as the reflexive assumption that any economic problem can be solved by government action, since the right answer often involves a mixture of market forces and government policy. But the payoff is huge: understanding how markets actually work--and what to do when they don't. This book unlocks the essential issues at the heart of any economic question. --From publisher description.

The novelty-narrative hypothesis is used to understand stock market instability using big data textual analytics of financial news.

In this witty, accessible, and revealing book, Deirdre McCloskey demystifies economic theory and practice to show that behind the economists claim to certainty is the ancient art of storytelling. If You're So Smart will engage, enlighten, and empower anyone trying to evaluate the experts who stand ready to engineer our lives. "Writing with delicious wit and great seriousness."—Publishers Weekly. " "McCloskey is more interesting on an uninspired day than most of her peers can manage at their very best."—Peter Passell, New York Times