Reviews: November/December 2019

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Narrative Economics: How Stories Go Viral and Drive Major Economic Events
Robert J. Shiller, Professor of Economics
Princeton University Press, $27.95
Reviewed by James Ledbetter ’86

James Ledbetter is editor-in-chief of Inc. magazine.

Why do some ideas and stories grab hold in a culture for decades, while others remain obscure? It’s a complex question, and Robert Shiller’s answers draw on fields as far flung as psychology, linguistics, and, of course, economics.

Take the “Laffer curve,” a diagram that was famously drawn on a restaurant napkin in 1974 to illustrate the economic efficiencies of different levels of taxation. Popularized by the late journalist Jude Wanniski, Arthur Laffer’s curve became an easily digestible method of selling supply-side economics, so much so that it helped change the course of modern American economics.

Leaving aside the economic validity of Laffer’s observation, what made the story go viral? Part of it is simplicity; part is that it helped tell a story that the nation’s wealthy had an interest in pushing. But, Shiller insists, the napkin itself mattered: “There is ample scientific evidence that unusual visual stimuli aid memory and can help to make a narrative ‘iconic.’” Shiller’s analysis tackles similar economic narratives, including one-off events (such as the rise of Bitcoin) and “perennial” narratives (such as bubbles and job-stealing technology).

Shiller, a Nobel laureate, doesn’t exactly offer a handbook for how to make an economic narrative take off—or how to prevent one from doing so. But he has created seven thought-provoking propositions about these narratives, including “Economic narratives thrive on human interest, identity, and patriotism” and—painfully, for those who have devoted their lives to facts—“Truth is not enough to stop false narratives.”

With its eclectic references and short, snackable chapters, the book is meant to appeal to an audience beyond economists alone. But to the extent that Shiller has an agenda, it is to exhort economists to pay more attention to the role that narrative plays in their discipline.