My Amazon Review of Robert Shiller's "Narrative Economics: How Stories Go Viral & Drive Major Economic Events"

Telling Stories

My UCLA colleague Ed Leamer always reminds me that human beings are story telling animals. Here Yale economics professor and Nobel Laureate Robert Shiller has written a whole book on the subject as to how convincing narratives, whether true or false, can influence economic behavior. Some of the narratives he discusses are:

·        Housing prices can only go up.

·        Technological advancement leads to unemployment.

·        “New Era” booms in the stock market.

·        Gold is the only true store of value.

·        It is socially unacceptable for wealthy people to be extravagant in hard times.

When these ideas go viral they obviously can effect economic behavior. In order to track how viral an idea can be Shiller uses the science of epidemiology to track its rise and fall counting its appearances in publications or in the case of today how it trends over the internet.

Although Shiller doesn’t really give us a formal analytical framework as to how we can integrate a narrative into making predictions about economic behavior, he certainly makes the case that economists have to take into consideration prevailing narratives when trying to understand the macro economy where both booms and slumps can get exaggerated by the presence of mass psychology. This concept is far from new, but Shiller expresses it in a different way.

The full amazon URL appears at: https://www.amazon.com/review/R4XHVF8GCEJOX/ref=pe_1098610_137716200_cm_rv_eml_rv0_rv