The contagion of these theories did not generally take the form of someone sitting down with a pencil and paper and saying, “Let me explain the IS-LM model to you.” In most cases, the communication was probably much more elementary and human. Economic historian Warren Young suspects that the contagion of the IS-LM diagram had something to do with its resemblance to the intersection of supply and demand that is perhaps the most famous image in all of economics.10
In addition, the IS-LM model was a formalization of John Maynard Keynes’s theory. Keynes was a brilliant writer, but as we have seen, many narratives are associated with celebrities. Keynes himself was a colorful figure and a celebrity in his own right: he hobnobbed with the Bloomsbury group of artists and intellectuals, among other celebrities (including the writer Virginia Woolf, who was embarking on her own epidemic of fame, which did not peak at least until near the end of the twentieth century, long after her death in 1941). Keynes was reputed to be gay or bisexual, and his male relationships were well known among the tolerant Bloomsbury group, providing a spicy bit of gossip that, at that time, could travel only by word of mouth. Gayness was not generally a good thing for one’s career in Keynes’s day, but it might have been in the context of a certain narrative. Keynes later married a beautiful ballerina, Lydia Lopokova, who experienced her own epidemic of popularity after she retired from dancing, likely because of her association with Keynes. And, as we have already noted, Keynes was famous for his 1919 best seller, Economic Consequences of the Peace, which in effect predicted World War II. In contrast, John Hicks, who first published the IS-LM model, was not quite so colorful a figure. Thus stories about Keynes were possibly “donkeys” that helped carry the IS-LM model to contagion.11
Figure 3.3 shows the life history of four economic models. These histories resemble not only the normal course of a disease epidemic but also the life history of other kinds of narratives. Elements of the essential ideas in economic narratives may survive as they are adapted and incorporated in later narratives involving other contagious ideas, but they tend to lose their punch and identity in the process. Their ability to direct thought and action becomes much diminished.
A key proposition of this book is that economic fluctuations are substantially driven by contagion of oversimplified and easily transmitted variants of economic narratives. These ideas color people’s loose thinking and actions. As with disease epidemics, not everyone becomes infected. In the case of narrative epidemics, the people who miss the epidemic may tell you that there was no such important popular narrative. But in a historic epidemic, for most people the narrative will be fundamental to their reasons for doing, or not doing, things that affect the economy. Just like the economic theories in Figure 3.3, popular theories among the general public grow on an upward epidemic path, but only for a while. They then recede unless they get renewed.
FIGURE 3.3. Frequency of Appearance of Four Economic Theories, 1940–2008
The figure shows four important models: the IS-LM model (Hicks, 1937), the multiplier-accelerator model (Samuelson, 1939), the overlapping generations model (Samuelson, 1958), and the real business cycle model (Kydland and Prescott, 1982). All four show hump-shaped patterns through time. Source: Google Ngrams, no smoothing.
It is noteworthy that Keynes’s book The General Theory of Employment, Interest, and Money (1936) put forth the idea of a perfectly mechanical contagion without using that phrase. According to Keynesian theory, an economic boom starts when some initial stimulus, such as government deficit spending, causes an initial increase in some people’s income. These people then spend much of their additional income, which in turn generates income for other people who sell to them or work for companies that sell to them. They in turn spend much of this extra income, thus generating another round of income increases for yet other people, and so on in multiple rounds of expenditure. The Keynesian theory can be tweaked to add some investment dynamics, as Paul Samuelson showed in 1939 with his multiplier-accelerator model, thus creating hump-shaped responses in national income as a result of an economic stimulus. These hump-shaped responses resemble the epidemic curves we have seen. We can view the Keynes-Samuelson model as an epidemic model of sorts, where the contagious element is income. However, it is not enough to think solely in terms of mechanical, multiple rounds of expenditure. We must think of multiple rounds of expansion of economic narratives, and of the ideas and feelings embodied in them.
Constellations and Confluences of Narratives
Just as the world experiences co-epidemics of diseases, where two or more diseases interact positively with each other, we also see co-epidemics of narratives in which the narratives are perceived as sharing a common theme, such as case studies that illuminate a political argument, creating a picture in the mind that is hard to see if one focuses on just one of the narratives. In other words, large-scale economic narratives are often composed of a constellation of many smaller narratives. Each smaller narrative may suggest a part of a larger story, but we need to see the full constellation to discern the full theme.
The analogy to constellations should be clarified. Astronomical constellations, such as Cygnus the Swan, are chance alignments of stars, but humans interpret them in a way that seems natural to the human mind—in this case, as a swan. Sometimes humans co-opt constellations for certain purposes. For example, Christians have renamed Cygnus as the Northern Cross to put one of their symbols in the sky. They also paired it with another constellation, the Southern Cross, for people living in the Southern Hemisphere. Other groups and cultures have different narratives with other motivations.
Narratives appear in constellations partly because their credibility relies on a set of other narratives that are currently extant. That is, they sound plausible and interesting in the context of the other narratives. The storyteller does not need to refute the other narratives to set the stage for the current one. Also, the narrative may be based on certain assumed facts that the teller and the listener do not know how to test. Some narratives are contagious because they seem to offer a confirming fact. We can say with some accuracy that most people put on a show of their own knowledgeability and try to conceal their ignorance of millions of facts. Hence narratives that seem contrary to prevailing thought may have lower contagion rates that do not result in epidemics.
Some narrative constellations may at their peak infect only a small fraction of the population, but if that fraction of the population curtails its spending substantially, the narrative may matter a lot. For example, if the narrative has reached only 20% of a country’s population, but that fraction decides to postpone purchasing a new car or fixing up their house, the impact of its decreased spending may be big enough to tip the country into a recession.
In addition to a constellation of narratives, there is a confluence of narratives that may help drive economic events. By a confluence, I mean a group of narratives that are not viewed as particularly associated with one another but that have similar economic effects at a point in time and so may explain an exceptionally large economic event. For example, in my 2000 book Irrational Exuberance, I listed a dozen precipitating factors, or narratives, that happened to occur together around 2000 to create the most elevated stock market in the United States ever, soon to be followed by a crash. The list, in brief, comprised the World Wide Web, the triumph of capitalism, business success stories, Republican dominance, baby boomers retiring, business media expansion, optimistic analysts, new retirement plans, mutual funds, decline of inflation, expanding volume of trade, and rising culture of gambling. If we want to know why an unusually large economic event happened, we need to list the seemingly unrelated narratives that all happened to be going viral at around the same time and affecting the economy in the same direction. However, it is important to recognize that big economic events usually can’t be described as caused by just a single constellation of narratives. It is far more likely that big economic events are not explainable in such satisfying terms. Instead, explaining those
events requires making a list of economic narratives that itself cannot be described as a simple story or a contagious narrative.
In part III of this book, we focus on some of the brighter stars in the narrative constellations, those that are significant enough to contribute substantially to changes in economic motivations. We cannot yet link these constellations precisely to severe economic events. But even with partial views of the constellations and confluences, we are making progress toward understanding the events.
We also have no more than a partial view of the forces that make some narratives into epidemics. The ability of narratives to “go viral” is something of a mystery, which we attempt to unravel in the next chapter.
Chapter 4
Why Do Some Narratives Go Viral?
It is difficult to state accurately or to quantify the reason a few economic narratives go viral while most fail to do so. The answer lies in a human element that interacts with economic circumstances. Beyond some simple and predictable regularities, a network of human minds sometimes acts almost like a random number generator in selecting which narratives go viral. The apparent randomness in outcomes has to do with randomness in the mutation of stories to more contagious forms, and with moments of our individual lives and attentions, that can lead to a sudden climax of public attention to specific narratives. We routinely find ourselves puzzling years later over the reasons for the success of popular narratives in history and for their economic consequences.
The Spontaneity of Narratives in Human Thinking and Actions
At the beginning of the twentieth century, scholars from a wide array of disciplines began to think that narratives, stories that seem to have entertainment value only, are central to human thinking and motivation. For example, in 1938 the existentialist philosopher Jean-Paul Sartre wrote,
A man is always a teller of tales, he lives surrounded by his stories and the stories of others, he sees everything that happens to him through them; and he tries to live his life as if he were recounting it.1
The story of oneself and the stories one tells about others inevitably have diverse connections to what we call “human interest,” either directly or indirectly.
When we are asleep at night, narratives appear to us in the form of dreams. We do not dream of equations or geometric figures without some human element. Neuroscientists have described dreaming, which involves characters, settings, and a hierarchical event structure, as based on a storytelling instinct. In fact, the brain’s activity during dreaming resembles the activity of certain damaged brains, in which lesions of the anterior limbic system and its subcortical connections lead to spontaneous confabulation.2
In their attempts to understand social movements, sociologists have begun to think of the contagion of narratives as central to social change. For example, sociologist Francesca Polletta, who studied the sit-in social movement of the 1960s in which white Americans participated in protests of discrimination against blacks, reported that students described the demonstrations as unplanned, impulsive, “like a fever,” and “over and over again, spontaneous.”3 These demonstrations were often driven by a particular popular narrative about blacks demanding service at lunch counters that were labeled as “white only,” accompanied by young white supporters who showed moral outrage at the exclusion of blacks. This kind of protest, christened the “sit-in,” ultimately became a symbol of a new social movement.
The sit-in story emerged from a single story about a February 1, 1960, protest involving four students from Greensboro Agricultural and Technical College. The story revolved around polite young black people who ignored orders to leave the lunch counter where blacks were not served. The young people sat patiently, waiting to be served, until the restaurant closed, and they returned the next day with more young people. The story went viral, through word of mouth and through news media attention, and within weeks the sit-ins spread throughout much of the United States. The story’s spread was not entirely unplanned, Polletta concludes. Activists tried to promulgate the story, but they were not in tight control of the social movement, which was largely viral. The word sit-in, coined in 1960, was a true epidemic, with a hump-shaped curve resembling the hump-shaped pattern through time that we see in disease epidemics (see Figure A.1). Use of the term sit-in, as revealed by Google Ngrams, grew until 1970, ten years later. In the interim, the movement spawned the word teach-in, which had a similar epidemic curve, though less intense and fading earlier.
Several generations earlier, another story had raised white people’s sympathy for the plight of black people in the United States. It appeared in Harriet Beecher Stowe’s 1852 novel Uncle Tom’s Cabin. The book was the most successful novel in the nineteenth-century United States, selling over a million copies when the country’s population was much smaller and less able to afford books. It tells the story of an older slave, Uncle Tom, who loves children and who tells stories to Little Eva, the white slave owner’s innocent little daughter. Eva, still a child, dies of a sudden illness, but not before asking to have locks of her hair cut off and distributed to the slaves, with a wish that she will see them again in heaven. Tom is separated from his wife and children and sold to a vicious slave owner, Simon Legree, who beats him mercilessly for refusing orders to beat another slave.
The book contains some highly evocative scenes, including one of a slave mother, Eliza, fleeing with her four-year-old son after she is told that he will be sold. Pursued by the slave owner’s bloodhounds, Eliza clutches her son as she struggles to cross the dangerous ice of the Ohio River. A hit song (in the form of sheet music), “Eliza’s Flight,” appeared in 1852, and numerous plays, called “Tom shows,” typically including the Eliza scene, sprang up all over the northern United States, likely infecting far more people than the printed book did. The Uncle Tom, Simon Legree, and Eliza narratives played an unmistakable role in the North’s decision to invade the South after it seceded. The Civil War began in 1861, a historic event with enormous human and economic significance.
On the Universality of Narrative
Anthropologists, who research the behavior of diverse cultures around the world, have observed a class of behaviors that they call “universals,” found in every human society if not in every individual. Anthropologist Donald E. Brown identified a universal that is important to this book: that people “use narrative to explain how things came to be and to tell stories.”4 In fact, the narrative is a uniquely human phenomenon, not shared by any other species. Indeed, some have suggested that stories distinguish humans from animals, and even that our species be called Homo narrans (Fisher, 1984), Homo narrator (Gould, 1994), or Homo narrativus (Ferrand and Weil, 2001). Might this description be more accurate than Homo sapiens (i.e., wise man)? It is more flattering to think of ourselves as Homo sapiens, but not necessarily more accurate.
In ancient Greece, the philosopher Plato appreciated the importance of narratives; he wrote his philosophy in the form of fictional dialogues featuring the celebrity Socrates. The narrative force helps to explain what makes his work still popular today. In his dialogue Republic, written around 380 BCE, Plato has a character argue that the government should censor popular stories. Talking with Adeimantus, Socrates says:
I do not say that these horrible stories may not have a use of some kind; but there is a danger that the nerves of our guardians may be rendered too excitable and effeminate by them.5
In his book De Oratore (On the Orator, 55 BCE), itself a book about narrative, the Roman senator Cicero says:
Nature forms and produces men to be facetious mimics or story-tellers; their look, and voice, and mode of expression assisting their conceptions.6
Other species have culture, but narratives do not transmit that culture. How is it that other animals learn fundamental survival skills, such as fearing specific predators? Experiments have shown that monkeys are genetically predisposed to fear snakes, and birds are genetically predisposed to be afraid of hawks. Moreover, experiments have shown that monkeys and bi
rds acquire fear when they observe others attack their own species. They also acquire fear, even lasting fear, when they observe circumstances that arouse fear among others in their group even if no attack occurs.7 But that mechanism of cultural transmission is imperfect, and the ability to transfer stories with language is uniquely human. Human narratives’ power in inspiring fear lies in the fact that the information can be transmitted without any observation of the fear-inducing stimulus. If the narrative is strong enough to generate a salient emotional response, it can produce a strong reaction, such as an instinctual fight-or-flight response.
Also universal are norms of polite conversations that facilitate the transmission of narratives. Basic politeness involves simple actions like looking at the person with whom one is speaking, and giving some indication of hello at the beginning of the conversation and good-bye at the end. These norms tend to flatter the other party. They are so engrained that, as experiments have shown, people are somewhat polite when conversing with computers too.8 Visitors to any human society will observe people facing each other, sitting around the television or the campfire, and talking—and, more recently, tweeting and posting to other social media—to learn others’ reactions, to seek feedback that will either confirm or disconfirm their thoughts. It seems that the human mind strives to reach an enduring understanding of events by forming them into a narrative that is embedded in social interactions.
Narrative Economics Page 5