Robert Shiller: Narrative Economics: How Stories Go Viral and Drive Major Economic Events

Abstract

s most recent book attempts a formidable task of introducing narratives into economics. By doing so, it strives to be nothing short of a beginning of "a new theory of economic change" (Shiller, 2019: 3). Shiller is well poised for this attempt. He is most known for his work on asset prices (Case -Shiller index fame) and the irrationality of financial markets, for which he received the Nobel Prize in 2013 (or rather The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel). He covered the same subject in a more popular tone as the author of the bestselling Irrational Exuberance, originally published in 2000. He also co -authored two very successful books with George Akerlof (another Nobel Prize winner) -Animal Spirits in 2009 and Phishing for Phools in 2015.Shiller is primarily concerned with the virality of stories -what makes them contagious and interesting for repetition. The importance of this book lies in the interest for how the "narrative contagion affects economic events" (Shiller, 2019: xi), and indeed substantially drives economic fluctuations (Shiller, 2019: 26). The principal strengths and weaknesses of this book stem from this connection. It is worthwhile to note that this interest in combining epidemiology and economics predated the Covid -19 pandemic, as the book was originally published in October 2019. There is also an earlier and briefer version, which first appeared as Shiller's presidential address at the American Economic Association, published as NBER working paper and then as a journal article in The American Economic Review in 2017. This elementary manoeuvre has, however, gained a note of familiarity as a result of the pandemics.Shiller is able to illustrate the various narrative contagions with the use of two databases: he uses Google Ngrams for the frequency of appearance of key terms in books and ProQuest News and Newspapers for newspaper articles and advertisements. Shiller strives to provide enough historical examples of viral narratives to convince the reader of their importance to economic processes. He peppers the book with diverse bits of information, which make for a fun and informative read. To a certain extent, it

The impact of bitcoin on gold, the volatility index (VIX), and dollar index (USDX): analysis based on VAR, SVAR, and wavelet coherence

“…This fact fascinated investors from all ages, religious groups, political regimes and continents. Shiller (2020) describes this phenomenon through epidemiological models such as infectious diseases. Moreover, he considers pandemics like Ebola a reliable tool for identifying the BTC price explosions.…”

Heuristic Model of “Effective Interpreter” in Portfolio Investment in High-Tech Companies

“…Это согласуется с более общей парадигмой так называемой нарративной экономики, введенной в качестве концептуализации Р. Шиллером в 2017 году [Shiller, 2017;Mackintosh, Shiller, 2021]. Согласно Шиллеру, распространяясь среди общественности в виде популярных историй, идеи могут стать вирусными и двигать рынки, будь то вера в то, что акции технологических компаний могут только расти, что цены на жилье никогда не падают, или в то, что некоторые фирмы слишком велики, чтобы обанкротиться.…”

“…Как обращают внимание С. Макинтош и Р. Шиллер, нарративы о пузырях на фондовом рынке подпитываются психологией, так как цены на акции связаны с общим доверием [Mackintosh, Shiller, 2021]. В то же самое время общее доверие основано на поведенческой динамике, включая стадное поведение.…”

Investor bias, risk and price volatility

“…Some narrations can go viral as it happens in the transmission of epidemics and may significantly affect decisions. Shiller (2020a) stresses the importance of the contagion of narratives which is a significant mechanism for economic change and an important dimension that can be used in economic forecasting. Shiller (2020b) shows examples of popular economic narratives.…”

“…As Shiller (2017) discusses a significant change in the dominant narration may alter investors' behavior. The role of narratives is significant in economic decision making as Shiller (2020a) claims that some narratives go viral among the public. Recent empirical evidence shows that narrations are quite important and significant in impacting economic outcomes and financial markets (Goetzmann et al, 2016;Bhargava et al, 2022;Borup et al, 2022).…”