It was strange conversation that never quite got going. They seemed to be mostly talking past each other. It felt like a couple of STEM people struggling with a Humanities topic neither was entirely comfortable with.
I’d summarize it this way:
- Roberts: But is this narrative true?
- Shiller: What matters is that narratives influence economic events.
- {repeat, ad nauseam}
- Roberts: But how do you know the narrative influenced events?
- Shiller: Economists take a lot of stuff on faith.
I was surprised that Russ Roberts thought this was a risky book, and Shiller didn’t disagree. I suppose I shouldn’t have been, given that associating the humanities with economics (pace occasional invocations of Adam Smith’s Theory of Moral Sentiments on this podcast) as a (wannabe) hard science risks tainting the brand. There was no mention of political economy; I supposed it’s too Humanities. Shiller even made light of behavioral economics.
I concluded that one challenge for my research agenda will be persuading STEM aficionados that stories make a difference. Roberts kept pressing Shiller on how tenuous the causal chain is between what’s published and behavior, and it’s a valid concern:
- We can observe behavior
- But we don’t know whether & how behavior is shaped by beliefs
- And we don’t know how beliefs are shaped by what people hear and read
- And we don’t know how whether what’s heard or read is something that was published (i.e. academically observable)
- Though we can make some crude counts about what is published.
Even if one accepts that (published) narratives affect what people believe, that doesn’t mean these beliefs are the true motivation for their behavior, let alone that they influence economic outcomes.
Shiller is not arguing, as Roberts contends in response to a reader comment on the podcast page, that “we can measure/observe narratives and then measure their impact on economic variables.” Shiller’s is more a narrative claim (a story about stories), and a backward-looking (descriptive not prescriptive, pace Tolle’s point below) one. From his opening remarks, around timecode 1:01:
"For me, Narrative Economics is the study of popular narratives that relate to economic behavior. People change their thinking about economic issues through time. And this causes events, economic events, I believe. And the form that their change of thinking takes is stories. They don't write down equations or draw diagrams. They tell stories, narratives--stories with a bit of morals to them or lessons in them. And then, if those stories go viral, we see economic changes."I particularly liked some of Marilyne Tolle’s comments on the podcast page, e.g. “In publishing their forecasts and giving press conferences about their policy decisions, monetary policymakers craft stories about the economy and its likely future path, with the goal of shaping people’s expectations and behaviours.”
Here are a few excerpts that struck me.
At 20:34:
"We have to understand that we're living in a jungle of narratives."At 42:21, Shiller’s answer to Roberts’s challenge of how one knows that narrative influenced events:
"And then let's get back to thinking about decisions. If you interpret the high unemployment of the Great Depression as possibly due to technological unemployment - isn't that going to affect, why wouldn't that affect your decisions, whether to "let's take a big vacation right now," or buy two cars instead of one, you would want to save more because you think you have a bigger cushion. That's rational response to such a narrative. So we know that the narrative was prominent and we know what a rational response would be to the narrative. So why are we doubting that it was important at that time?"At 48:33, Shiller’s guess about the roundabout way academic ideas influence events:
"It goes first from the book to a scholar; and then it goes to some imagery and a story that illustrates it; and then it has its influence."For the most part, the “narratives” in this conversation were merely beliefs, and sometimes explanations. There were very few stories with plot and character, though Shiller did mention Freud’s The Interpretation of Dreams, noting that psychotherapists are skeptical about whether what’s known consciously is what’s really affecting behavior – one needs to dig into dreams. I’m beginning to think that criterion for mythical stories is that they’re like dreams: they have character, chronicle and causation, plus a setting; they’re fragmentary; and they don’t come with explanations on the can.
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