Nobel Prize-winning economist and Yalie Robert Shiller was in Hartford recently pitching his new book that makes the compelling case that narratives, or stories told by the press and others, help drive major economic events and trends.
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Nobel Prize-winning economist and Yalie Robert Shiller was in Hartford recently pitching his new book that makes the compelling case that narratives, or stories told by the press and others, help drive major economic events and trends.
He also credited President Donald Trump for his “brilliant” use of narratives — whether they be used for good or bad, or steeped in truth or misinformation — in helping shape human thinking.
In a recent Time Magazine interview about his new book, “Narrative Economics: How Stories Go Viral and Drive Major Economic Events,” Shiller defines narrative economics as “the study of popular stories that are economically relevant, that have a moral, that are a lesson that people will take heed of in their economic decisions.”
He brings to light what many in the media, including myself, have long understood: that storytelling, particularly from trusted news sources, helps shape not only the way people think but act.
I’ve long thought that narratives and human psychology played significant roles in driving stock-market performance and economic trends. Shiller pointed to several examples.
Bank-failure panics throughout U.S. history, particularly before deposit insurance was invented, have been caused by stories of jittery depositors withdrawing their savings fearing a bank closure. The ill-informed narrative that home prices would always go up led to the housing-bubble burst earlier this century.
The rising popularity of cryptocurrencies — spurred by their attractiveness as a new innovation — belies the fact that few people understand how they actually work, or that they’re an unregulated currency with limited utility.
“Once a narrative gets going, it can be hard to stop it,” Shiller told a World Affairs Council of Connecticut audience recently gathered at the Mark Twain House & Museum in Hartford.
Importantly, Shiller’s talk got me thinking about the narrative that has defined Connecticut now for more than a decade: that we are a high-tax, fiscally irresponsible state that is losing its population and businesses.
In reality, there are many truths to that narrative, which is why it has become part of the Connecticut lexicon, especially as politicians, private-sector leaders, members of the press — myself included — and even average residents continue to harp on the state’s poor fiscal, tax and business climates.
“If everyone is saying this is a high-tax state, it will have an impact,” Shiller said.
That point is significant because I, like Shiller, believe narratives are powerful shapers of human behavior and that all the negative press Connecticut has received in recent years has had a deleterious impact on the state.
Does that mean members of the press, political leaders and others ought to put on rose-colored glasses?
No, but I would argue that words do matter and that we need to avoid hyperbole, or risk creating a permanent, overly negative narrative that restricts the state’s growth and future.
More importantly, state lawmakers have the power to rewrite that narrative with pro-growth policies. That would be the best way to truly win back the hearts and minds of the masses.
