Robert Shiller, 2013 Nobel laureate in Economic Sciences, has always challenged convention. A critic of rational expectations modelling, he demonstrated that stock prices were much more volatile than those models would suggest. And he was among the few who predicted the Internet stock bubble and the housing bubble a few years later.
A few months ago, he published a new book, Narrative Economics: How Stories Go Viral and Drive Major Economic Events. Much of this book outlines the “perennial economic narratives” of recent and distant American economic history, such as panic versus confidence, frugality versus conspicuous consumption, and real estate booms and busts. (There are actually a total of nine). Shiller uses data from Google Ngrams and Proquest News and Newspapers to trace the rise, fall, and sometimes recurrence of these narratives. He also suggests how awareness of narrative trends could advise policy-makers such as the Federal Reserve, perhaps enabling them to let the air out of bubbles slowly, to do the least macroeconomic harm.
Given my interest in narrative, I read Narrative Economics eagerly, and I have just published a review in the Journal of Public Administration Research and Theory, the top-ranked public administration journal.
The review begins by recapitulating Shiller’s argument, and then critiques it. My criticism extends mainly to how he defines narrative and describes selected narratives, whether his nine narratives form a coherent set, and what his database doesn’t say about the salience of economic narratives as opposed to other kinds of narratives. My overall conclusion is strongly supportive of the intent and importance of Shiller’s research on economic narrative.
If you are interested in reading the full review it is now on the JPART website under advance articles and its DOI is 10.1093/jopart/muz040. If you have access through an institutional library, you should be able to find it there. For readers who don’t have institutional access, here is a link to a pdf (Shiller review) of the complete review.