“Is the Market Actually Efficient? No, It Is Only a Very Powerful Narrative” — Christoph Gisiger interviews Robert Shiller

Christoph Gisiger interviews Robert Shiller about his new book, Narrative Economics. Robert Shiller also provides some general financial advice based on CAPE.

Interestingly, Robert Shiller is one of the chief influencers of the economic and financial narratives of both the day and the times, and his influence spills over into the social and political narratives, too. One of the powerful influencers of those narratives is the Nobel Prize, which Riksbank undoubtedly knew when they established the "Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel."

The commonly held view is that there is an objective reality in which we all live and that it is knowable by all. This is the commonsense view or naïve view in epistemology. It doesn't hold up on reflection which has been known for millennia and alternatives debated. 

Basically, humans see through the lens of their "hardware" and "software," the hardware being the common natural characteristic that human's share and the software being the lens that human acquire through social conditioning, which is also influenced by personal disposition. 

Far from seeing reality more of less "as it is," humans use language to construct worldviews that they identify with reality. Humans share worldviews to some extent based on social exposure and interaction, but even here the various worldviews differ based on each persons uniqueness as an individual.

Narratives a "teaching stories" are prehistorical. Humans have always shaped their "reality." Science is an attempt to minimize the subjective and isolate the objective. But many people give science much more credit in this regard than is due, since humans have to operate through the distorted lens of human perception and cognition, and the influence of affect. Philosophers explored this since the begining of reflection on experience and behavior and only recently has this also been investigated "scientifically," in psychology and cognitive science.

Presently, narrative control is big business. Think, for example, public relations, and marketing & advertising, not to mention political strategy, propaganda and the like. Many, many people are employed in this conscious and intentional endeavor not only to shape the narrative but to dominate it.

ProMarket — The blog of the Stigler Center at the University of Chicago Booth School of Business
“Is the Market Actually Efficient? No, It Is Only a Very Powerful Narrative”
Christoph Gisiger interviews Robert Shiller

Narrative Economics: a review — Chris Dillow

Short review of Richard J. Shiller's Narrative Economics. (The links are important.)

How narratives shape presumptions as hidden assumptions, expectations and confidence that affect risk appetite, and behavior, including economic behavior, questioning how "rational" homo economicus actually is. 

The post suggests the importance to TPTB of maintaining narrative control.

Stumbling and Mumbling
Narrative Economics: a review
Chris Dillow | Investors Chronicle

Once upon a time — Diane Coyle

Diane Coyle reviews Robert Shiller's new book, Narrative Economics: How Stories Go Viral and Drive Major Economic Events, on the power of narrative, i.e., story. The most ancient from of knowledge transmission in social reproduction was myth. Mythos means "story" in Greek. Ancient cultures were characterized by teaching stories.

This so-called primitive technology (concepts and numbers) still works to influence. Why? Because it is holistic, engaging the spectrum of human response. MMT presentation makes liberal use of narrative technique, e.g., "ten dogs and nine bones." Anyone can get that.

As the preface notes, the idea isn’t new; the 1894 Palgrave’s Dictionary of Political Economy mentions narrative economics. Robert Merton’s well-known concept of self-fulfilling (or self-averting) prophecies covers much of the territory of narrative dynamics. But perhaps today’s economy is more vulnerable than ever to contagion. An early chart in the book illustrates the surge in the proportion of articles across several socal science and humanities disciplines that contain the word ‘narrative’. Economics and finance are well behind history (of course) but also anthropology, sociology and political science.

Anyway, the book is about how narrative contagion affects economic events. It has in mind epidemic models, as well as – well, narratives. Each chapter focuses on a number of examples. The first section starts with Bitcoin as an example of how narrative affected behaviour and outcomes, then introduces some of the concepts concerning how narratives ‘go viral’ and the psychology of contagion. Part 2 is a brief section setting out ‘seven propositions of narrative economics’ (including ‘truth is not enough to stop false narratives’. Quite.) Part 3 describes recurring economic narratives such as financial boom and bust, or automation and jobs. The final part of the book sets out questions for research....

The Enlightened Economist
Once upon a time
Diane Coyle | freelance economist and a former advisor to the UK Treasury. She is a member of the UK Competition Commission and is acting Chairman of the BBC Trust, the governing body of the British Broadcasting Corporation