Proudhon’s words clearly appeal to people who feel frustrated by authority or blame authority for their lack of personal fulfillment. It took about forty years for anarchism to reach epidemic proportions, but it has shown immense staying power, even to this day. Indeed, the Bitcoin.org website carries a passage by anarchist Sterlin Lujan, dated 2016:
Bitcoin is the catalyst for peaceful anarchy and freedom. It was built as a reaction against corrupt governments and financial institutions. It was not solely created for the sake of improving financial technology. But some people adulterate this truth. In reality, Bitcoin was meant to function as a monetary weapon, as a cryptocurrency poised to undermine authority.5
Most Bitcoin enthusiasts might not describe their enthusiasm in such extreme terms, but this passage seems to capture a central element of their narrative. Both cryptocurrencies and blockchains (the accounting systems for the cryptocurrencies, which are by design maintained democratically and anonymously by large numbers of individuals and supposedly beyond the regulation of any government) seem to have great emotional appeal for some people, kindling deep feelings about their position and role in society. The Bitcoin story is especially resonant because it provides a counternarrative to the older antianarchist narratives depicting anarchists as bomb-throwing lunatics whose vision for society can lead only to chaos and violence. Bitcoin is a contagious counternarrative because it exemplifies the impressive inventions that a free, anarchist society would eventually develop.
The term hacker ethic is another modern embodiment of such anarchism. Before the widespread availability of the World Wide Web, sociologist Andrew Ross wrote, in 1991,
The hacker ethic, first articulated in the 1950s among the famous MIT students who developed multiple-access user systems, is libertarian and crypto-anarchist in its right-to-know principles and its advocacy of decentralized technology.6
In his 2001 book The Hacker Ethic and the Spirit of the Information Age, Pekka Himanen wrote about the ethic of the “passionate programmers.”7 In the Internet age, people’s willingness and ability to work together with new technology—in new frameworks that do not rely on government, on conventional profit, or on lawyers—have surprised many of us. For example, wikis, notably Wikipedia, encourage cooperation among large numbers of anonymous people to produce amazing information repositories. Another success story is the Linux operating system, which is open-source and distributed for free.
But among the many examples of viral economic narratives, Bitcoin stands supreme. It is a narrative that is well crafted for contagion, effectively capturing the anarchist spirit; and, of course, that is why most of us have heard of it. It is part bubble story, part mystery story. It allows nonexperts and everyday people to participate in the narrative, allowing them to feel involved with and even build their identity around Bitcoin. Equally appealing, the narrative generates stories of untold riches.
Bitcoin as a Human-Interest Narrative
The Bitcoin narrative is a motivating narrative for the cosmopolitan class around the world, for people who aspire to join that class, and for those who identify with advanced technology. And like many economic narratives, Bitcoin has its celebrity hero, Satoshi Nakamoto, who is a central human-interest story for Bitcoin. Adding to the romance of the Bitcoin narrative is a mystery story, for Satoshi Nakamoto has never been seen by anyone who will testify to having seen him. One early Bitcoin codeveloper said that Satoshi communicated only by email and that the two had never met in person.8 On its website, Bitcoin.org says only, “Satoshi left the project in late 2010 without revealing much about himself.”
People love mystery stories and love to unravel the mystery, so much so that there is a rich genre of mystery literature. Bitcoin’s mystery story has been repeated many times, especially when intrepid detectives have identified a person who may be Nakamoto. The repeated publicity for an intriguing mystery made the contagion rate of the Bitcoin narrative higher than it would have been otherwise.
Bitcoin and the Fear of Inequality
In addition to tapping into anarchist sentiment and the mystery of Satoshi Nakamoto, the Bitcoin story is a story of the desire for economic empowerment. During the twenty-first century, as economic inequality in advanced countries has increased rapidly, many people feel helpless, and they desire greater control over their economic lives. Bitcoin prices first took off around the time of the 2011 Occupy Wall Street / “We are the 99%” protests. Adbusters, a social activist organization that wanted its message to go viral, launched these protests in the United States, and Occupy protests occurred in many other countries too. It is no coincidence that the Bitcoin narrative is one of individual empowerment, because, according to the narrative, the coins are anonymous and free of government control, management, and reach.
Another part of the underlying narrative that has spurred Bitcoin’s and other cryptocurrencies’ high contagion rate is the story of computers taking greater and greater control of people’s lives. In the twenty-first century, people have access to automated assistants, such as Amazon’s Alexa, Apple’s Siri, and Alibaba’s Tmall Genie, that understand human speech and respond knowledgeably and intelligently to questions with a simulated human voice. In addition, driverless cars, trucks, trains, and ships seem likely in the near future, raising the specter of mass unemployment among truck drivers and other people who drive or navigate for a living. The “technology is taking over our lives” narrative is the most recent incarnation of a labor-saving-machinery narrative that has scared people since the Industrial Revolution.
The insistent fear in this Luddite narrative (to which we will return in chapter 13) is that machines will replace jobs. The fear is not that you will show up for work one day and be told that the company is purchasing a new computer that will do your job. Rather, the changes are more gradual, inevitable, and cosmic. More likely, as computers automate more tasks, you may find that your employer seems increasingly indifferent to your presence, fails to offer pay raises, does not encourage you to stay with the company, and doesn’t hire others like you, and eventually no longer even remembers you. Fear about your future is more an existential fear about not being needed.
In such an environment, options are eliminated. Computers can be educated to perform new tasks many orders of magnitude faster than human beings can. Calls for government expenditures on education of people to offset the job loss created by computers seem justified, but it is hard to imagine that people can win in the long run. Millions of students around the world question whether their education is preparing them for success, creating an anxiety that indirectly feeds the contagion of technologically driven cryptocurrencies such as Bitcoin, which seem at least superficially to offer some imaginable hope of mastering the computers.
Bitcoin and the Future
The digital signature algorithm that underlies Bitcoin, that defines a Bitcoin’s individual owner, and that makes it prohibitively difficult for thieves to steal Bitcoin has received some attention since the early 1990s, but coverage of that narrative epidemic cannot compare with coverage of Bitcoin itself. ProQuest News & Newspapers finds only one article with the words elliptic curve digital signature algorithm in its entire database. It finds only five articles that use the phrase digital signature algorithm. The RSA algorithm, the original cryptography algorithm that may have started the Bitcoin revolution, dates back to 1977. ProQuest lists twenty-six articles that mention the RSA algorithm. But that number doesn’t begin to compare with the fifteen thousand–plus articles that mention the word Bitcoin.
The difference must result from the contagiousness of the larger Bitcoin narrative. The phrase digital signature algorithm sounds like something a student would be trying to memorize for an exam: technical, painful, boring. There is so much more to the Bitcoin story. Notably, it is a story about how Bitcoin investors have become rich simply by being aware of new things on the cutting edge. Bitcoin is about the “future.” That sound bite is easily remembered, a topic to bring up with ent
husiasm in conversation at a social gathering. In short, Bitcoin is a gem of a story.
People often buy Bitcoin because they want to be part of something exciting and new, and they want to learn from the experience. This motivation is particularly strong because of the underlying story, the narrative that computers are poised to replace many of our jobs. But computers can’t replace all of our jobs. Somebody has to control those computers, and there is a narrative today that the people in charge of the new technology will be the winners. Very few people feel secure that they will be on the winning end of this curve. Even taking a degree in computer science doesn’t seem to be a sure path to success today, because it may lead to a humdrum job as a low-level programmer, or even to no job at all. A desire to be on the finance side of the tech business, where Bitcoin sits, is popular because there are so many stories illustrating that financiers take control of things. Bitcoin enthusiasts may think that experimenting with Bitcoin will put them in touch with the people who are going to be winners in the new world, will give them insight about how to stay in (or gain) control. It is easy to jump-start one’s connection to this new reality by buying some Bitcoin. Best of all, one doesn’t have to understand Bitcoin to buy it. Vending machines at convenience stores now sell Bitcoins and other cryptocurrencies. This “Be a part of the future” narrative, enhanced by regular news of exciting fluctuations in the price of Bitcoins, gives them value. It generates fluctuations in Bitcoin prices in terms of national currencies, and these fluctuations thrive on and produce contagious narratives.
Bitcoin as a Membership Token in the World Economy
We are living in a peculiar transition period in human history, in which many of the world’s most successful people see themselves as part of a broader cosmopolitan culture. Our nation-states sometimes seem increasingly irrelevant to our ambitions. Bitcoin has no nationality, giving it a democratic and international appeal. Inherent in its pan-national narrative is the idea that no government can control it or stop it. In contrast, old-fashioned paper money, typically with historical engravings of famous men in a country’s history, suggests an obsolete nationalism, something for losers. Paper currency resembles little national flags in a way; it is a symbol of one’s nationality. Having a Bitcoin wallet makes the owner a citizen of the world and in some sense psychologically independent of traditional affiliations.
How, then, do we summarize the popularity of Bitcoin? In the end, people are interested in Bitcoin precisely because so many other people are interested in it. They are interested in new stories about Bitcoin because they believe that other people will be interested in them too.
The surprising success of Bitcoin is not really so surprising when we consider the basic principles of narratives discovered by intellectuals who have thought about the human mind, about history, and about mathematical models of feedback. We discuss these great thinkers and their contributions in the next chapter. Most of these thinkers were not economists by training or profession.
Chapter 2
An Adventure in Consilience
For me, thinking about narrative economics has been an adventure in the discovery of consilience. The word consilience, coined by philosopher of science William Whewell in 1840 and popularized by biologist E. O. Wilson in 1994, means the unity of knowledge among the differing academic disciplines, especially between the sciences and the humanities. All these different approaches to knowledge are relevant in understanding the real and human phenomenon of the economy and its sudden and surprising changes. When one reflects that the economy is composed of conscious living people, who view their actions in light of stories with emotions and ideas attached, one sees the need for many different perspectives. Narrative economics therefore requires concepts from most university departments.
Unfortunately, academic disciplines tend to become insular. A researcher cannot know everything, and so the impulse is to think one must specialize, narrowing one’s inquiry to the point where one can reasonably judge that one has all relevant knowledge on a narrowly defined subject. To some extent, university researchers must live with this reality. But the impulse can go too far, and it often leads to overspecialization.
When economists want to understand the most significant economic events in history, they rarely focus on the important narratives that accompanied those events. As Figure 2.1 shows, economics has lagged behind most other disciplines in attending to the importance of narratives. And, while all disciplines increasingly pay attention to narratives, economics and finance are still playing catch-up, despite occasional calls for a broader approach to empirical economics.1
FIGURE 2.1. Articles Containing the Word Narrative as a Percentage of All Articles in Academic Disciplines
All fields show increased attention to narratives in recent years, but economics and finance are relative laggards. Source: Author’s calculations using data from JSTOR.
Nor do most economists appear interested in using the enormous databases of written words that they might work with to study narratives. When they do use the word in published work, they most often do so casually and tangentially to refer to what they perceive to be a conventional view that they will criticize. In addition, they rarely document the narrative’s popularity, convey its popular human-interest stories, or consider the impact of its popularity on economic behavior. Finally, the word narrative tends to appear in offbeat or popularizing economics journals. However, to the extent that an incipient theory of narrative economics holds promise for helping us better anticipate major economic events, economists can and should be learning more about narrative, gathering insights by scholars from the fields discussed in this chapter. This chapter is an exercise in consilience. It summarizes how thinkers in a variety of fields have used narrative to advance knowledge within their disciplines and across disciplines, and it provides a foundation on which economists might build to think more imaginatively about narrative.
Epidemiology and Narrative
Medical schools have pursued mathematical modeling of the spread of disease epidemics for about a hundred years, making the field well developed and bursting with potential applications to economics. Epidemiology has produced not one model but rather many different models that can be applied to different circumstances, and it is central to this book, as we will see in subsequent chapters. For those who want to examine these mathematical models in detail, the appendix at the end of this book provides a survey of the models and their possible applications to economic narratives.
History and Narrative
Historians have always displayed an appreciation for narratives. However, as historian Ramsay MacMullen noted in Feelings in History: Ancient and Modern (2003), a deep understanding of history requires inferring what was on the minds of the very people who made history—that is, what their narratives were. He does not literally stress the concept of narratives; he has told me that he would prefer a word conveying “stimulus to some emotional response, and there is no such word.” If we want to understand people’s actions, he argues, we need to study the “terms and images that energize.” For example, he asserts that it is impossible to understand why the American Civil War was fought unless we engage deeply with vividly told stories, such as the 1837 news story reporting an angry mob’s shooting of the abolitionist newspaper editor E. P. Lovejoy in Alton, Illinois, in 1837. This evocative story whipped antislavery sentiment in the North to a feverish fury that persisted for years. Academic discussion regarding the extent to which the Civil War was fought over slavery cannot be conclusive unless we take into account the emotional power of relevant narratives.
The late Douglass North, economic historian and Nobel laureate, echoes MacMullen’s conviction in his 2005 book, Understanding the Process of Economic Change, which emphasizes the importance of human intentionality, essentially in the form of narratives, in the development of economic institutions.
Insights from Sociology, Anthropology, Psychology, Marketing, Psychoanalysis, and Religious Studies
Another example: anthropologist William M. O’Barr and economist John M. Conley interviewed investment managers about their business and found a widespread tendency for employees at the firm to tell a story about the founding of their firm and about its values.10 The story has some common features across firms, and it is akin to the creation myths that, as anthropologists have noted, primitive tribes tell about their own origin. The story tends to center on one man (rarely a woman) who showed exceptional foresight or courage in founding the tribe—or, in this case, the firm. The narrative tends to revert to the founding-father story to justify the many stories about the firm as it exists today.
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