And we must stand against terror by going back to work. Everybody here who showed up for work, at this important industry, is making a clear statement that terrorism will not stand, that the evildoers will not be able to terrorize America and our work force and our people. (Applause.) … When they struck, they wanted to create an atmosphere of fear. And one of the great goals of this nation’s war is to restore public confidence in the airline industry. It’s to tell the traveling public: Get on board. Do your business around the country. Fly and enjoy America’s great destination spots. Get down to Disney World in Florida. Take your families and enjoy life, the way we want it to be enjoyed.19
President Bush also lavished praise on Americans: “This is a determined nation, and we’re a strong nation. We’re a nation based upon fabulous values.” Like a good sports coach, he was encouraging team spirit, both among the airline workers and among the citizenry as a whole. His narrative suggested a script for strong, courageous, inspired behavior. That narrative was expressly designed to encourage the ideas that we all are watched by others and that we all must set an example of courage. During the economic recovery, however, most economists did not recognize the flashbulb quality of the September 2001 attacks, which encouraged a contagious constellation of narratives and may have profoundly affected US businesses and the US economy.20
The Ubiquity of Fake News
In attempting to be vivid, storytellers often resort to fiction or fake news, thereby providing amplified tales. The history of narratives shows that “fake news” is not new. In fact, people have always liked amusing stories, and they spread stories that they suspect are not true, as for example in urban legends. In fact, people often spread titillating stories without making any clear moral decision whether they are spreading falsehoods or not.
Fake news often makes an impression on people because the brain processes that implement reality monitoring are imperfect. According to psychologists and neuroscientists, source monitoring is a difficult process for the brain, which judges sources by their linkages to other memories.21 Thus, over time, the brain may forget that it once deemed stories unreliable. Also, adeptness in source monitoring differs across individuals, and temporal diencephalic and frontal lobe damage in the brain may contribute to extreme defects in source monitoring.22
As an example, let’s look at fake wrestling matches, where wrestlers appear to break the rules and almost kill each other. People seem to derive pleasure from watching a match that others would say is obviously fake and trying to pretend that it is real. A word for this strange phenomenon, kayfabe, appeared in print starting in the 1970s.
The fake wrestling match does not proceed as a by-the-rules high school or college wrestling match would. Instead, it includes a number of outrageous story elements. One of the combatants may be flamboyantly evil and/or ugly in his near nakedness, while the other is clean-cut, handsome, and honorable. The bad guy acts cowardly, hides behind the ropes, and slips in an illegal strike in plain view of the audience when the referee briefly looks away. He tortures the opponent when he is down, and he climbs up high on the ropes and pretends to jump onto his opponent’s abdomen.
The fakery is often so obvious that any observer would see through at least some of it. Spectators sometimes even shout, “Fake!” during a match when the acting is not up to their standards. And yet the match is presented and largely accepted as if it were true. Spectators seem to want it to be possibly true, at least some of the time, and they may pretend it is true to stimulate their imaginations. However, as literary theorist Roland Barthes notes, spectators at these matches rarely bet on the outcome as they do in other sports: “That would make no sense … wrestling sustains its originality by all the excesses which make it a spectacle and not a sport.”23 In other words, at some level, many people enjoy believing the story and do not care about its factuality.
Fake fighting matches have a long history in many countries, indicating an enduring story. A ProQuest News & Newspapers search for fake wrestling shows the phrase dating back to 1890, with a reporter noting that “there have been a lot of fake wrestling matches lately.”24 Even in ancient Rome, in the minutes preceding the real gladiatorial combats that sometimes resulted in death, there was fake combat, prolusio, that whetted the audience’s appetite for the real thing to follow.25 Prolusio probably resembled modern fake wrestling matches, and in some ways it may even have been more interesting to watch, in that the actors were experienced and skilled in manipulating audiences, and some were celebrities.
Much has improved since ancient Romans released lions to maul and kill criminals, runaway slaves, and Christians in the Colosseum. We have established news media with reputations for honesty. The twenty-first century has seen the birth of fact-checking websites, including AP Fact Check, factcheck.org, politifact. com, snopes. com, USAfacts.org, and wikitribune. com. All of these sites have built their reputation by debunking fake news rather than by reporting all sides of a controversy without taking sides, which was once common in the mainstream news media. Unfortunately, most people do not read these fact-checking websites. In addition, their credibility has recently been compromised by fake news designed to harm their reputations, leading some members of the general public to give up the hope of ever finding the real truth.
What conclusions can we draw? Given its presence over the centuries and millennia, fake news seems to be part of the normal human condition. Fake performances, fake stories, and fake heroes are ubiquitous. The fakery is so creative that we cannot view the performances as caused by fundamental economic forces. Instead, the opposite is true: the fakery, in the form of fake narratives, affects economic outcomes.
Evidence on Causation from Constellations of Narratives
In studying narratives from archival data, we may miss the constellation of narratives behind any single aspect of cultural change because we may be able to view only some of the superficial narratives. From our vantage point many decades later, it is like standing on the earth on a partly cloudy night and trying to discern the constellations in the sky above. We certainly will not see some of the stars. In addition, narratives typically come and go over a period of years, but economic fluctuations are often sudden, as in a financial panic that unfolds over a matter of days. But the seeds of that panic may well have been planted over months or years.
Ultimately, the mass of people whose consumption and investment decisions cause economic fluctuations are not very well informed. Most of them do not view or read the news carefully, and they rarely get the facts in any discernible order. And yet their decisions drive aggregate economic activity. It must be the case, then, that attention-getting narratives drive those decisions, often with an assist from celebrities or trusted figures.
Once we recognize that newly mutated stories within narrative constellations can cause current economic events, we have made substantial progress. But it is not easy to achieve a secure understanding of how narratives affect the economy. We need to step back first and consider some basic principles, some alluded to in previous chapters, to guide our thinking, which brings us to the next chapter.
Chapter 8
Seven Propositions of Narrative Economics
So far, we’ve seen that popular narratives gone viral have economic consequences. Ultimately, we want economists to model this relationship to help anticipate economic events. First, though, we want to offer some basic propositions about economic narratives that we can use to understand historically important narratives and to identify new narratives as they develop.
Before we begin, let’s review a few key features of economic narratives. As the Bitcoin narrative illustrates, an economic narrative reminds people of facts they might have forgotten, offers an explanation about how things work in the economy, and affects how people think about the justification or purpose of economic actions. The narrative may imply something about the way the world works—in the Bitcoin narrative, the notion that computers are taking over, that we are enterin
g a new cosmopolitan era freed from the perennial problems of local government incompetence and corruption—and how we can use that information to our advantage. Or the narrative may suggest that performing a specific economic action is a useful learning experience that will yield possible benefits in the future. Sometimes, performing the economic action is a way of involving ourselves in the narrative itself. By taking part in the narrative, we can say that we are a part of history. For example, by purchasing Bitcoin, we joined the international capitalist elite.
Proposition 1: Epidemics Can Be Fast or Slow, Big or Small
Economic narrative epidemics come in many different sizes and time frames. There is no standard course for a narrative epidemic, and rapid growth of a fast epidemic does not mean it will have long-run significance. In the appendix to this book we review models from medical epidemiology that show that contagion and recovery parameters can be chosen for the models that imply fast big epidemics, fast small epidemics, slow big epidemics, and slow small epidemics.
Because a narrative can come and go over many decades, it may last longer than any data series on which economists rely to measure the narrative’s impact. We must therefore not rush to judgment on the impact of a narrative. For example, if we assume that a viral economic narrative is exactly like a meme that goes viral on Facebook or Twitter over a period of days, then we will miss the possibility that a historic long boom is the result of an epidemic that has occurred over a much longer time frame.
Another example: if we do not appreciate that some epidemics are fast and some are slow, we are likely to overrely on best seller status to judge a work’s importance. Best seller lists tend to reflect sales over short intervals of time. The New York Times list of best-selling books, for example, reports on the books that sold the most copies in just the current week. (From earlier chapters, we understand why the news media emphasize a short time interval: they have to keep coming up with news stories.) The short time frame explains why the Bible and the Koran are never on the best seller lists. If we look at the New York Times best seller lists from decades past, hardly any of the books will be familiar. Most were flash-in-the-pan short-term epidemics.
The contagion rate also varies greatly from one narrative epidemic to another. One example of a narrative epidemic with very high contagion might be that of a national emergency, like the start of a war. With such narratives, people feel that the story is so important that they have license to interrupt any other conversation with the news, or to speak with people with whom they do not normally communicate. An example of a successful narrative with a very low contagion rate might be a patriotic story illustrating a country’s national greatness, a story that is brought up only at appropriate times at home, in the classroom, or at events sponsored by civic organizations. Such a narrative can develop (slowly) into a huge epidemic if the forgetting rate is low enough.
Narratives also differ in their recovery rate or forgetting rate. Narratives with high recovery rates often are isolated, not part of a constellation. Narratives with low recovery rates include those with constant reminders. For example, when we see homeless people and beggars on the streets, we remember narratives about massive unemployment during a depression. Longer-term narratives are more likely to have an impact on one’s view of the world or one’s sense of the meaning of life.
As the mathematical model in the appendix shows, a high contagion parameter and a low recovery rate mean that almost the whole population eventually hears the narrative, sometimes very quickly. But the same narrative can reach most of the population rather slowly if the contagion parameter is low but the recovery rate is even lower. The following example is illustrative.
I conducted a questionnaire survey in the United States right after the October 19, 1987, stock market crash, which was the biggest one-day drop in US history. I asked a random sample of US high-income individuals exactly when they first heard about the crash. Of the respondents, 97% said they heard of it on the day of the drop. The average answer was 1:56 p.m. Eastern Time / 10:56 a.m. Pacific Time.1 Most of the respondents did not hear about this drop via the morning newspapers or the evening television news. They heard it by direct word of mouth as the event was happening.
Proposition 2: Important Economic Narratives May Comprise a Very Small Percentage of Popular Talk
In trying to judge the importance of economic narrative epidemics, we should not base our conclusions on the assumption that the most economically important narratives are those that are constantly talked about. Very significant epidemics may generate very little talk. In addition, because people are always talking, some kind of narrative is always spreading. In studying economic narratives, we must not be distracted by the small talk that is not useful in explaining economic changes.
In 1932, near the height of the Great Depression, Franklin Roosevelt challenged incumbent Herbert Hoover in the US presidential election. Writing for the New York Times, Pulitzer Prize–winning journalist Arthur Krock tried to summarize what ordinary people were saying about the economic situation. He listened to people talking, “avoiding prompting as much as possible”:2
By train, motor car, airplane and on foot I have wandered 10,000 miles. I have talked with, observed and listened to many hundreds of people on trains, in restaurants, on the streets, in speakeasies, in hotel lobbies, in clubs and in their own houses.
He visited twenty US cities over the course of a month and wrote down casual conversations he’d had, or overheard, word for word, that seemed to exemplify what people were saying. He was a little surprised that almost all of the talk was banal:
Little did I hear of books or plays. Not one new joke was told by a drummer in my hearing. Not a word of personal enthusiasm for any candidate for office did I hear.
Krock’s article stands as a warning not to be complacent about narratives that are contagious only in certain venues, and that are not talked about except at certain times. Economic theories are not the topic of casual conversations, even though the news media discuss economic ideas frequently, and people must be thinking about them.
Krock found that people wanted to talk incessantly about the effects and terrors of the Great Depression. For example, he records the words he heard in 1932 from a taxi driver:
A Taxi Driver in Cleveland—Did you come in from the East? How are things there? If you want to know how they are here, watch the garbage cans behind the all-night restaurants about 3 o’clock mornings. See the guys who are getting their meals that way. They aren’t all bums by a long shot.… Do they think East that Roosevelt can make things better? Anyhow they can’t be worse. I used to make a good living before Hoover came in. Not on this taxi. I was firing on the Central but they took my job away; no business. This is a good burg, but it is flat now. When do you suppose it will come back?
This quote suggests a contagious narrative about good people made so desperate by the Great Depression that they are reduced to eating garbage. The idea conjures a mental image and an emotion of disgust. The taxi driver also asks a question for which there was no clear answer: When will prosperity return? He wants to know whether the country is stuck in a long-term depression because his economic decisions (for example, how much to spend) depend on the answer. The desperation narrative of people eating garbage may suggest a long haul, which leads the taxi driver to ask the urgent question “When do you suppose it will come back?” The driver wanted some enlightenment about the future from the apparently knowledgeable Krock, but he probably did not expect a quantitative answer. Rather, he probably hoped Krock would provide some kind of narrative offering clues as to the future.3
In judging the impact of economic narratives on human economic behavior, we will find it helpful to recall that conversations rarely touch on important economic decisions, such as how much to save for retirement. Should you save 5% of your income? 10%? more? Try to remember any conversation on this topic, and likely you won’t dredge up a single one. And yet people have to make decisions about how
much to save, and they must base this decision on something. Maybe that decision during the Great Depression was influenced by the narratives of depression hardship, like those men eating from garbage cans at 3 a.m. Maybe, too, the decision was based on the impressions of worried experts, whom nobody really knew, suggesting that there might be a reason to fear a long-lived economic downturn with serious human consequences. On their own, any individual, vague narratives might not have determined behavior, but a constellation of such narratives may have.
Proposition 3: Narrative Constellations Have More Impact Than Any One Narrative
Narratives that occur together in a constellation may have different origins, but in our imaginations they seem grouped together in terms of some basic idea, and they reinforce one another’s contagion. Alternative terms for narrative constellations include grand narrative, master narrative, and metanarrative, but I prefer not to use them because they suggest more organization or intellectual quality than is warranted when simple story contagion spreads narratives across a broad public.
Sometimes narratives within a constellation are stripped of identifying names or places, and the narrative takes the form of “They say that …” without stating who “they” are. In using the pronoun they, the teller of the “They say that” narrative conveys that there is a constellation of narratives featuring or told by seemingly authoritative persons. The borders of such narrative constellations may be redrawn from time to time, with a particular narrative borrowing contagion from other currently contagious narratives.
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