Robert Shiller: Economics and the human instinct for storytelling

Robert Shiller writes about Economics and the human instinct for storytelling.

Why do economists miss the stories behind many of our economic fluctuations? One reason is that economists have a tool kit, and narrative hasn’t traditionally been in it. We view narrative as somebody else’s territory. We do simultaneous equations. We teach general equilibrium theory. That’s fine, but by the time we finish teaching those, we’re tired.

But there is room for economists to do research on narrative economics. We have databases. We can do quantitative analysis. It’s not easy to study the very human phenomena of narratives, but we can collaborate with people in the humanities—people such as literary theorists, who try to understand why some story structures work and others don’t. If we do, and if we make room in our tool kit for narrative, I’m optimistic that in the next 10 or 20 years, we will have a better understanding of economic fluctuations.

Emphasis Mine

Shiller would agree with Scott Adam's assessment that the economy is booming become President Trump inspires small business confidence.

Do narratives drive the economic fundamentals, such as interest rates, rate of return, inflation rate, money supply? Narratives do definitely drive hyperinflation, because narratives are expressions of expectations.

It is also important to know which narratives are dominant. The workers' narratives are drowned out by the Capitalists'.