Visual Aids Go Viral
Why did the napkin story go viral? Good storytelling seems at least partially responsible. After the Wanniski story exploded, Laffer said that he could hardly remember the event, which had taken place four years earlier.12 But Wanniski was a journalist who sensed that he had the elements of a good story. The key idea, as Wanniski presented it, is indeed punchy.
It may seem absurd to conclude that a story element of a drawing on a napkin helped make the story go viral. But there is ample scientific evidence that unusual visual stimuli aid memory and can help to make a narrative “iconic.” It’s not that everybody remembers the napkin in the story. Rather, a small detail like a graph drawn on a napkin might have raised the contagion rate at the beginning of the narrative above the forgetting rate.
The Laffer curve embodies a notion of economic efficiency easy enough for anyone to understand. Wanniski suggested, without any data, that we were on the inefficient side of the Laffer curve. The drawing of the Laffer curve seemed to suggest that cutting taxes would produce a huge windfall in national income. To most quantitatively inclined people unfamiliar with economics, this explanation of economic inefficiency was a striking concept, contagious enough to go viral, even though economists protested that the United States was not actually on the inefficient declining side of the Laffer curve.13 However, there may be some situations in which the Laffer curve offers important policy guidance, notably with taxes on corporate profits. A small country that lowers the corporate profits tax rate below that of other countries may see companies moving their headquarters to that country, enough to raise that country’s corporate tax revenue.14 But an objective analysis of the Laffer curve did not lend itself to a punchy story that could have stifled the Laffer epidemic and the relating of it to personal income taxes. To tell the story really well, one must set the scene at a fancy restaurant, with powerful Washington people and a napkin.
In the end, the Laffer curve napkin story may have gone viral because of the sense of urgency and epiphany conveyed by the story: the idea was so striking, so important, that an economics professor wanted to do something out of place at a fancy restaurant to make government officials see its brilliance.
Ultimately, the story’s rich visual imagery helped it evolve from an economic anecdote into a long-term memory. The visual detail of the napkin may have lowered the speed at which people forgot the narrative, which could have helped the epidemic penetrate a large fraction of the population. There is a lesson to be learned here for those who want their stories to go viral: when authors want their audience to remember a story, they should suggest striking visual images. In ancient Rome, the senator Cicero advocated the use of this strategy, quoting the scholar Simonides:
For Simonides, or whoever else invented the art, wisely saw, that those things are the most strongly fixed in our minds, which are communicated to them, and imprinted upon them, by the senses; that of all the senses that of seeing is the most acute; and that, accordingly, those things are most easily retained in our minds which we have received from the hearing or the understanding, if they are also recommended to the imagination by means of the mental eye.15
Indeed, psychology and marketing journals have found that, at least in some circumstances, bizarre mental images do serve as memory aids.16 For example, Harry Lorayne, a memory-training specialist, has long advocated that people who would like to improve their memory should try to form unusual, highly visual mental images. His suggestion for people who mislay their keys:
As you drop your keys into the flowerpot, form a mental image of the two vital entities—the keys and the place where you’re putting them. Make it a silly or impossible image. Example: “See” a gigantic key growing in a flowerpot.17
As neuroscience has shown us, long-term memory formation involves many regions of the brain, including visual-image processing regions.18
Rubik’s Cube, Corporate Raiders, and Other Parallel Epidemics
Another fad appeared around the same time as the Laffer curve. Rubik’s Cube, invented in 1974 by Ernő Rubik, is a puzzle in the form of a cube-shaped stack of multicolored smaller cubes. As the narrative went, Rubik was a creative Hungarian sculptor and architect whose puzzle captivated the scientific and mathematics community worldwide because it fostered a narrative that it represented some interesting mathematical principles. Scientific American magazine did a cover story on the cube in its March 1981 issue, with the lead article by Douglas R. Hofstadter. Author of the best-selling Gödel, Escher, Bach (1980), Hofstadter was a science writer with a gift for uniting science with art and the humanities. His article presented Rubik’s Cube as representing deep scientific principles. He described connections to quantum mechanics and the rules for combining the subatomic particles called quarks. Few people remember these details today, but they do remember that Rubik’s Cube is somehow impressive. Rubik’s Cube was bigger than the Laffer curve on ProQuest News & Newspapers, but smaller than the Laffer curve on Google Ngrams. Both show similar hump-shaped paths through time.
Other narratives in the same constellation with the Laffer curve sprang up around the same time. The terms leveraged buyouts and corporate raiders also went viral in the 1980s, often in admiring stories about companies that responded well to true incentives and that produced high profits as a result. One marker for such stories is the phrase maximize shareholder value, which, according to ProQuest News & Newspapers and Google Ngrams, was not used until the 1970s and whose usage grew steadily until the twenty-first century. The phrase maximize shareholder value puts a nice spin on questionable corporate raider practices, such as saddling the company with extreme levels of debt and ignoring implicit contracts with employees and stakeholders. Maximize suggests intelligence, science, calculus. Shareholder reminds the listener that there are people whose money started the whole enterprise, and who may sometimes be forgotten. Value sounds better, more idealistic, than wealth or profit. Use of the three words together as a phrase is an invention of the 1980s, used to tell stories of corporate raiders and their success. The term maximize shareholder value is a contagious justification for aggressiveness and the pursuit of wealth, and the narratives that exploited the term are most certainly economically significant.
The Laffer Curve, Supply-Side Economics, and Narrative Constellations
After the Laffer curve epidemic, the Reagan administration (1981–89) reduced the top US federal income tax bracket from 70% to 28%. It also cut the top-bracket US corporate profits tax rate from 46% to 34%, and it reduced the top US capital gains tax rate from 28% to 20% in 1981 (though it returned to 28% again in 1987 during the Reagan presidency). If the Laffer curve epidemic had even a minor effect on these changes, then it must have had a tremendous impact on output and prices.
For these reasons, the Laffer curve is well remembered to this day, but it was only one part of the narrative constellation now known as supply-side economics, which holds that governments can increase economic growth by decreasing regulation and lowering taxes. The term supply-side economics went viral around the same time the Laffer curve did. The Laffer curve contributed to the impact of the many supply-side narratives because it was a particularly powerful narrative. It had good visual imagery in the form of a scribbled-on napkin, it had authorities behind it just as Rubik’s Cube had Scientific American, and it suggested that politicians who raised taxes were fools.
One narrative circulating in the supply-side economics constellation was a widely spread story about the consequences of the Swedish Socialist government under Olof Palme, whose government, in a measure of extreme incompetence, inadvertently made the effective income tax rate (on high incomes) go over 100%. People who worked more ended up with less after-tax income. The story was reported all over the world, as for example in the United States in 1976 in the Boston Globe:
The typical Swedish dentist works fewer than 30 hours per week because any further earning would actually reduce his retained pay. Film director Ingmar Bergman, probabl
y the country’s most famous and admired citizen, left permanently last year after tax inspectors harassed him and seized his records in the middle of a rehearsal—based on a misunderstanding about his corporate rather than personal taxes.19
This story of tax rates above 100% in Sweden further mutated in 1976 when Astrid Lindgren, the acclaimed Swedish author of children’s books, published an amusing adult fairy tale about it, Pomperipossa in the World of Money. The “Pomperipossa Effect” may have contributed to the downfall of the Palme government that year.
Similar narratives of people paying more than 100% of their marginal income in taxes went viral in subsequent years, even in the United States, forming a constellation of narratives.20 These stories fed on one another. These narratives were about government incompetence, not arguments for lowering tax rates that were already well below 100% overall, but they supported a general impression that tax rates had gone too high. We can find evidence for the existence of this narrative constellation by searching digitized newspapers for the term highest tax bracket. In the 1950s, even though the highest US income tax bracket was extremely high, ranging from 84% to 92%, ProQuest News & Newspapers produces only 33 stories with this phrase. In the decade of the 1980s, even though the highest income tax bracket was gradually being reduced from 70% to 28%,21 there were 520 ProQuest stories featuring the term. Since the 1980s, the epidemic of stories about the highest tax bracket has continued to grow.
Attention to the highest tax brackets naturally drew attention to the lowest tax brackets and to effectively negative tax rates for the poorest, who were now judged in a less sympathetic light. In the United States, the term welfare mother refers to an unmarried woman and her children who are supported by unwilling male taxpayers. Use of the term exploded from zero in 1960 to a peak in the early 1970s, after President Lyndon Johnson announced his Great Society plan to eliminate poverty.
Property taxes came in for strong criticism too. In the 1970s, the news media began to notice a public opinion change (strongly in evidence for at least another decade after that) associated not with a celebrity but with a California referendum called Proposition 13. Passage of the proposition led to a 1978 constitutional amendment in California that put a firm limit on property tax increases. The “taxpayer revolt,” so named in newspapers of the time, swept the United States:
The taxpayer revolt that has started in California is about as grass-rootsy as Grape Nuts. But it has California state and local officials shriven with fear and perhaps guilt … Proposition 13 is spawning imitators in half the states of the Union.22
The stories that were circulating in an epidemic sweeping across the United States in 1978 were of tax rates so high that some homeowners could no longer afford to live in their homes and were forced to sell. Related stories railed against government inefficiency and corruption in the spending of tax revenue. These ideas, and the underlying narrative of a “tax revolt” in the United States, became contagious. But the taxpayer revolt came and went quickly, in the few years around 1978.
In the background was the rise of a free-market, laissez-faire narrative in the second half of the twentieth century in Anglo-Saxon countries. This rise was promoted by stories, such as Ayn Rand’s 1943 novel The Fountainhead. Its readership was limited in the 1940s, but the novel gradually rose to ever-greater prominence through the rest of the twentieth century. Rand’s 1957 novel, Atlas Shrugged, went viral. The novel was about a large national strike of productive people against the majority of people, the looters who support government regulation (including taxes) to extract wealth for their own selfish interests. The influence of Rand and her novels has continued to grow since her death in 1982, unlike the taxpayer revolt story, which was contagious only briefly. It seems that the novels were a slower but ultimately larger epidemic. A bit earlier, the phrase stimulate the economy had emerged in the late 1950s, and its use grew rapidly from 1978 to 1980, suggesting that tax cuts for higher-income people might serve as an energizer, freeing the supposedly superior people to contribute to society.
Celebrities, Quips, and Politics
Though the Laffer curve epidemic may have played a role in the election of Ronald Reagan and Margaret Thatcher, other narratives were surely influential, such as this quip by Reagan:
Government’s view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it.23
Reagan used these words in a 1986 speech. But the underlying idea dates back in slightly different form at least to 1967, when Walter Trohan, a conservative commentator for the Chicago Tribune, wrote that:
The federal government operates pretty much in line with the quip, “If it moves, tax it; if you can’t tax it, control it; if you can’t control it, give it a million dollars.”24
Thus the quip was already known in 1967. But it needed a celebrity to make it truly contagious, and Ronald Reagan was the celebrity who did just that.
Note the poetic quality of the three elements of the quip, but improved upon between Trohan and Reagan. Each line in Reagan’s version has the same basic structure of an “if-then” statement, with the dependent clause starting with “if” and the independent clause a simple two-word statement that is a command in the form of a verb followed by the word “it.” The rhetorical form not only added dignity to the quip but also aided its unaltered transmission and contributed to its high rate of contagion, probably because it suggests that everyone is talking about how onerous taxes are and that it isn’t just the speaker who is complaining.
In short, it seems likely that narratives like the Laffer curve and other supply-side stories touched off an intense public mandate for tax cutting.
We might argue, too, that the constellation of narratives about tax cutting and smaller government propelled a social movement: entrepreneurship. In 1987, the New York Times reported on one of Reagan’s pro-entrepreneurship narratives. It is often remembered today for its wit:
“You know I have a recent hobby,” the President remarked in a speech on economic matters earlier this month. “I have been collecting stories that I can tell, or prove are being told by the citizens of the Soviet Union among themselves, which display not only a sense of humor but their feeling about their system.”
Mr. Reagan then told his current favorite, about a Russian who wants to buy a car. A Matter of Delivery.
The man goes to the official agency, puts down his money and is told that he can take delivery of his automobile in exactly 10 years.
‘ “Morning or afternoon?” the purchaser asks. “Ten years from now, what difference does it make?” replies the clerk.
“Well,” says the car-buyer, “the plumber’s coming in the morning.”25
Rubik’s Cube was just a toy, not support for an economic narrative. But Reagan’s lighthearted jokes made for economically powerful entrepreneurial narratives. These new narratives encouraged entrepreneurial spirit and risk taking, and they brought about profound changes in the legal structure of the world’s advanced economies.
These examples, the Laffer curve and Rubik’s Cube, are just two of a vast universe of narratives. We need to understand their organizing force. The storage points for all these narratives is the human brain, with its prodigious memory capacity. In the next chapter, we use neuroscience to consider the structure of this repository.
Chapter 6
Diverse Evidence on the Virality of Economic Narratives
Further evidence on the impact of narrative contagion on the economy can be found in the story structures in the human brain, in the brain’s processing of frightening stories, in the long history of the news media in reinforcing primordial human interactions, in the emotional impact of effective book jackets, logos, and beauty contests.
The Impulse to Convey Stories
In 1958, brain surgeon Wilder Penfield implanted electrodes into the brains of human subjects while performing brain surgery, undertaken for medical reasons on wide
-awake patients, under only local anesthesia because the brain itself has no pain receptors. He discovered that electrically stimulating certain narrowly focused parts of the brain caused it to hear a sequence of sounds in chronological order:
When the electrode was applied in gray matter on the cut face of the temporal lobe at point 23, the patient observed: “I heard some music.” Fifteen minutes later, the electrode was applied to the same spot again without her knowledge. “I hear music again,” she said. “It is like radio.” Again and again, then, the electrode tip was applied to this point. Each time she heard an orchestra playing the same piece of music. It apparently began at the same point and went on from verse to chorus. Seeing the electrical stimulator box, from where she lay under the surgical coverings, she thought it was a gramophone that someone was turning on from time to time.1
Stimulating a different part of the brain caused a story to be told, again in chronological sequence:
A young woman (N. C.) said, when her left temporal lobe was stimulated anteriorly, at point 19 in Figure 5, “I had a dream, I had a book under my arm. I was talking to a man. The man was trying to reassure me not to worry about the book.” At a point 1 cm. distant, stimulation at point 20 caused her to say: “Mother is talking to me.” Fifteen minutes later the same point was stimulated: The patient laughed aloud while the electrode was in place. After the withdrawal of the electrode, she was asked to explain. “Well, she said, “it is kind of a long story but I will tell you.…”2
Penfield’s work has been highly influential in a number of disciplines. For our purposes, his results indicate the extent to which the human brain structure appears to embody some of the traits that we think of as exclusively human: the propensity to make music and the propensity to tell stories as sequences of events, stories that trigger emotions.
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