Chapter 6. Diverse Evidence on the Virality of Economic Narratives
1. Penfield, 1958, p. 57.
2. Penfield, 1958, p. 57.
3. Scholz et al., 2017, p. 2882.
4. Zak, 2015.
5. Maren and Quirk, 2004.
6. Milad et al., 2005.
7. Milad et al., 2014.
8. Miłosz, 1990 [1951], p. 239.
9. Hume, 1788 [1742], p. 103.
10. An account of this depression, from the viewpoint of the Province of Pennsylvania, is in Berg, 1946.
11. Alexander Windmill, Letter to the Printer, New-London Gazette, reprinted in the Connecticut Courant, May 20, 1765, p. 1. See also Colin McEnroe, “A Page from History: We Were There,” Hartford Courant, October 29, 1997, p. F8.
12. Le Bon, 1895.
13. Quoted from the Boston Transcript in “Art and Business in Book-Jackets,” Literary Digest 70 (September 10, 1921): 26–27.
14. Akerlof and Shiller, 2015.
15. Holt, 2002; Klein, 2009.
16. Keynes, 1936.
17. Newspapers used to run many beauty contests. In 1920, the Evening World in New York ran a series of photos of beautiful women, some of them famous, not all at once but over weeks, inviting readers to clip out and mail in a nominating coupon with a list of their five favorites. The reader could also suggest a new name and enclose a photo that might be added to the list of contestants for later publication. The list of the readers’ favorites was published and updated. There was, however, no prize to the reader, except possibly in the form of pleasure for having picked the winners. Moreover, the newspaper asked readers to select five favorites, not six. I have not been able to find the exact same beauty contest noted by Keynes. https://www.newspapers.com/image/78732551/?terms=Evening%2BWorld’s%2BBeauty%2BContest.
18. Allen et al., 2006.
19. R. A. Fisher, 1930.
20. See Leonard, 2006.
21. Bruner, 1998, p. 18.
22. Gaser et al., 2004.
23. Saavedra et al., 2009.
24. Losh and Gordon, 2014; Pierce et al., 2001.
25. Kahneman and Tversky, 2000; Thaler, 2015, 2016.
26. Johnson and Tversky, 1983; Slovic et al., 2007.
27. Loewenstein et al., 2001.
28. Dohmen et al., 2006.
29. Achen and Bartels, 2017.
30. Boltz et al., 1991.
31. Areni and Kim, 1993.
32. Cheng et al., 2017.
Chapter 7. Causality and Constellations
1. Hume, 1788 [1742], essay XIV, p. 101.
2. Farnam, 1912, p. 5.
3. Jevons, 1878, p. 36.
4. Merton, 1948; Azariadis, 1981; Cass and Shell, 1983; Farmer, 1999.
5. In his book The Tyranny of Metrics (2018), Jerry Muller details how overreliance on quantitative outcome measures defies sensible decision making in colleges, universities, schools, medicine, policing, the military, business, finance, philanthropy, and foreign aid.
6. “Stock Prices Move Up to Permanently High Plateau,” Toronto Star, October 16, 1929, p. 14.
7. Kai Sedgwick, “46% of Last Year’s ICOs Have Failed Already,” February 23, 2018, Bitcoin. com, https://news.bitcoin.com/46-last-years-icos-failed-already/.
8. Escalas, 2007.
9. Machill et al., 2007.
10. McQuiggan et al., 2008, p. 538.
11. Slater et al., 2003.
12. Cronon, 2013, p. 12.
13. Psychologists Roger Brown and James Kulik (1977) coined the term “flashbulb memory” and used the example of the news of the 1963 assassination of US President John F. Kennedy. They hypothesized that flashbulb memory happens when there is both extreme surprise and emotional arousal.
14. Luminet and Curci, 2009.
15. “The First Gun: Its Ominous Report Was Heard Around the World,” Los Angeles Times, February 1, 1896, p. 11.
16. “University High’s Class of ’42 Still Remembers Pearl Harbor,” Los Angeles Times, December 7, 1981, p. F1.
17. The NBER announces US recession dates months after the fact. In this case, the March 2001 beginning of the recession was not announced until November 2001. But economists generally thought the economy was in recession in September 2001.
18. “The Perfect Storm Tears Heart Out of the US Economy,” Guardian, November 14, 2001, p. 26.
19. “At O’Hare, President Says ‘Get on board!’ ” September 27, 2001, https://georgewbush-whitehouse.archives.gov/news/releases/2001/09/20010927-1.html.
20. Greg Ip mentioned the possibility that “a burst of patriotism” might be a factor in rising confidence then. “After Sept. 11 Attacks, a Rebound, of Sorts,” Wall Street Journal, October 15, 2001, p. A1.
21. “A central claim of the source-monitoring approach is that people do not typically directly retrieve an abstract tag or label that specifies a memory’s source; rather, activated memory records are evaluated and attributed to particular sources through decision processes performed during remembering” (Johnson et al., 1993).
22. Johnson et al., 1993.
23. Barthes, 2013 [1984], http://xroads.virginia.edu/~drbr/wrestlin.html.
24. “Kilrain’s Rheumatism,” Cincinnati Inquirer, February 22, 1890, p. 2.
25. “But a prolusion of that kind [rhetorical] ought not to be like that of gladiators, who brandish spears before the fight, of which they make no use in the encounter.” Cicero, 1860 [55 BCE], pp. 178–79.
Chapter 8. Seven Propositions of Narrative Economics
1. Shiller, 1989.
2. Arthur Krock, “What America Is Talking About,” New York Times, October 30, 1932, p. SM1.
3. Clearly, the original Keynesian idea that current income alone determines current consumption is not accurate, as Milton Friedman (1957) pointed out. He showed that consumption expenditures track current income much more for people in occupations where current income is a better guide to future income—that is, occupations whose incomes are not so volatile year to year. He hypothesized that spending is determined not by an individual’s current income, but by permanent income, the expected long-run average future income. But so too, in the Great Depression, Friedman’s permanent-income hypothesis wasn’t entirely accurate either. That model has people only reacting to income adjusted for its statistical properties. Christina Romer (1990) pointed out that after the stock market crash of 1929, consumption demand immediately fell, before people’s incomes had shown any evidence of decline. She concluded that the reduced demand must have been some reaction to the newfound uncertainty surrounding the crash. Demand depends on both expectations and uncertainty and through these as well on a variety of narratives, which, once experts seem discredited, are all people have to suggest the future. Tobin and Swan (1969) showed further problems with the permanent-income hypothesis.
4. https://www.thesun.co.uk/tech/5067093/lily-allen-bitcoin-billionaire-richer-than-madonna/.
5. See Shiller, 1989.
6. Siegel, 2014 [1994], pp. 250–53. The New York Herald Tribune, after expressing puzzlement why the US stock market did not drop after September 3, 1939, offered the possible explanation that “it seems clear that many persons who held on to their securities, or bought securities, were actuated by the belief, or the hope, that the stock market would follow the general pattern of the last world war, when, after eight months of doldrums during part of which there was no formal trading, it leaped upward in 1915 on the stimulus of war orders for Europe.” “War and the Markets,” New York Herald Tribune, September 4, 1939, p. 18.
7. World Health Organization, 2003, p. xiii.
8. Vosoughi et al., 2018.
9. The original song was published in Song Stories for the Kindergarten in 1893 by Patty and Mildred J. Hill. https://commons.wikimedia.org/wiki/File:GoodMorningToAll_1893_song.jpg.
10. Weems, 1837, p. 11.
11. Weems, 1837, pp. 13–14.
12. Wang et al., 2012.
13. Blanc, 1851, p. 91: “De chacun selon ses facu
ltés, à chacun selon ses besoins.” Matthew 25:15 quotes Jesus: “to each according to his ability.”
Chapter 9. Recurrence and Mutation
1. See Kuran and Sunstein, 1999.
2. However, most Civil War deaths were caused by disease, not battle. If considered as a disease epidemic, the Civil War was not the biggest in US history, not even close. See Nicholas Marshall, “The Civil War Death Toll, Reconsidered,” New York Times Opinionator, March 2014, https://opinionator.blogs.nytimes.com/2014/04/15/the-civil-war-death-toll-reconsidered/.
3. The term “Great Recession” was also attached to the mild 1990–91 recession, associated with another war in the Middle East, and again inviting comparisons to the Great Depression, by US presidential candidate H. Ross Perot during the 1992 presidential campaign. See James Flanagan, “What an Economy in Low Gear Means,” Los Angeles Times, July 26, 1992.
Chapter 10. Panic versus Confidence
1. Raymond Moley, quoted in Terkel, 1970, location 5151.
2. “The Financial Crisis,” New York Herald Tribune, September 26, 1857, p. 1.
3. Hannah, 1986.
4. “How the New Banking System Is Expected to Operate as a Cure for Business Panics,” Washington Post, December 29, 1913, p. 5.
5. George Gallup, “The Gallup Poll: An Increasing Number of Voters Believe Business Will Improve within Six Months,” Washington Post, February 4, 1938, p. X2.
6. Sidis, 1898, p. 6.
7. Marden, 1920, p. 175.
8. “First Scientific Weather Forecasting,” Chicago Daily Tribune, December 18, 1898, p. 29.
9. Diogenes, “Correspondence of the Mercury,” Charleston Mercury, February 15, 1858, p. 1.
10. The term leading indicators appears once in 1880 and twice in the 1920s in ProQuest News & Newspapers, but it was not an established public concept until the Great Depression in the 1930s. The significance of the 1938 Mitchell and Burns leading indicators in the history of economic thought is brought out by Moore, 1983. There was also the very influential 1946 book by Burns and Mitchell that expanded on the leading indicators. Arthur Burns later became chairman of the Federal Reserve Board, 1970–78, during a period of exploding inflation that he was blamed for, adding further contagion of talk and celebrity status to his forecasting model.
11. “Lays Bull Market to Coolidge ‘Tips,’ ” New York Times, August 24, 1928, referring to an Atlantic article of that month.
12. “The Wall Street Journal Straws: Difficult to Take Profits,” Wall Street Journal, November 5, 1928, p. 2.
13. “ ‘Why Does U.S. Fuss at Us’ Traders Ask: Public Eye Battle of Wall Street,” Chicago Daily Tribune, February 18, 1929, p. 25.
14. “New Threats Made to Cut Speculation,” Washington Post, April 5, 1929, p. 1.
15. Lewis H. Haney, “Looking 1930 in the Face,” North American Review 229(3) (March 1930): 365.
16. New York Times, January 5, 1931.
17. New York Times, September 25, 1884, p. 4.
18. “Reckless Talk in Congress,” New York Times, May 18, 1932, p. 20.
19. Irving Fisher, 1930, p. 63.
20. Thomas Mullen, quoted in “Money to Move as Fear Leaves, ‘Ad’ Men Told,” Christian Science Monitor, June 15, 1931.
21. Franklin Delano Roosevelt, First Inaugural Address, March 4, 1933, http://www.gutenberg.org/files/104/104-h/104-h.htm.
22. Goodreads. com lists “The only thing we have to fear is fear itself” as the most famous out of 139 famous Franklin Roosevelt quotes, in terms of “likes.” https://www.goodreads.com/author/quotes/219075.Franklin_D_Roosevelt.
23. Langlois and Durocher, 2011.
24. “In the Wake of Unemployment,” Hartford Courant, November 8, 1931, p. E5.
25. Roosevelt, first fireside chat, March 12, 1933, https://www.youtube.com/watch?v=r6nYKRLOFWg.
26. W. M. Kiplinger, “Causes of Our Unemployment: An Economic Puzzle,” New York Times, August 17, 1930, p. 111.
27. Lindbeck and Snower, 2001.
28. Eichengreen,1996; Eichengreen and Temin, 2000.
29. Marx, 2017 [1959], beginning of chap. 15.
Chapter 11. Frugality versus Conspicuous Consumption
1. One might anticipate finding such expectation of moderation in wealthy consumption out of respect for the unemployed in Henry George’s book Progress and Poverty, published at the end of the depression of the 1870s, but it is not there. Instead, he seems to think just the opposite, for he says, if inequality is someday reduced: “With this abolition of want and the fear of want, the admiration of riches would decay, and men would seek the respect and approbation of their fellows in other modes than by the acquisition and display of wealth” (George, 1886 [1879], chap. 4). One might also expect to see some recognition of moderation, in the extended depression of the 1890s, in Thorstein Veblen’s influential 1899 book The Theory of the Leisure Class, the book that coined the term “conspicuous consumption.” But a new modesty with that depression is not mentioned. Indeed, the panic of 1893 and the ensuing depression are not even mentioned in that book. Veblen, too, seems to think just the opposite, writing, “Freedom from scruple, from sympathy, honesty and regard for life, may, within fairly wide limits, be said to further the success of the individual in the pecuniary culture” (Veblen, 1899, chap. 9).
2. “Financial Crash Left Them Deeply in Debt,” Daily Boston Globe, March 10, 1930, p. 21.
3. “Family Breakdowns Reported Increasing,” New York Times, March 21, 1932, p. 2.
4. “Women Make Plea for Family Relief,” New York Times, May 17, 1936, p. N2.
5. Ruth Ellicott, “Household—Season for Home Refurbishing Arrives: Coziness Is Requisite for Winter, Entire Family Morale May Be Boosted by a Changed Household Environment,” Baltimore Sun, October 1, 1933, p. TM8.
6. Allen, 1964 [1931], p. 289.
7. Carol Bird, “We’re getting ‘ANCHORED’ Again Says Rita Weiman,” Washington Post, July 10, 1932, p. SM3.
8. “Keeping Up Appearances: DARE TO BE POOR!” Manchester Guardian, October 9, 1931, p. 6.
9. Catherine Hackett, “Why We Women Won’t Buy,” Forum and Century, December 1932, p. 343.
10. Anne O’Hare McCormick, “The Average American Emerges,” New York Times, January 3, 1932, p. SM1.
11. “Crime Decrease Noted in Depression Years,” New York Herald Tribune, February 23, 1934, p. 32, and “Crime among Young Shows No Increase,” Globe and Mail, November 22, 1937, p. 3.
12. “Citizens Advised Not to Give Money to Street Beggars,” Globe (Toronto), January 14, 1931, p. 14. “Begging in City Increases Daily, Survey Reveals,” New York Tribune, July 30, 1930, p. 4.
13. “Panhandling,” Washington Post, November 3, 1932, p. 6.
14. “Bars Apple Sellers from Busy Streets,” New York Times, April 16, 1931, p. 25.
15. “Apple Sale by Jobless Starts Friday: Unemployed Will Vend Fruit on Hartford Streets as a Way of Providing for Their Families,” Hartford Courant, November 27, 1930, p. 1. ProQuest Historical Newspapers: Hartford Courant.
16. “Holdup in Car Panhandler’s Thanksgiving,” Washington Post, April 28, 1932, p. 18. “Drive Begun on Peddlers,” Los Angeles Times, December 17, 1932, p. A10.
17. Roth, 2009, p. 12.
18. Stachura, 1986.
19. http://www.pbs.org/auschwitz/40-45/background/auschwitz.html.
20. Grace Kingsley, “Display of Luxury Is Out,” Los Angeles Times, March 31, 1932, p. A9.
21. “Display of Wealth Viewed as Offense,” New York Times, December 26, 1932, p. 21.
22. “1932’s Bargains Different from Those of 1931: To Claim Poverty No Longer Chic—Furs and Shoes Are Discussed,” Washington Post, April 7, 1932, p. S6. However, not everyone was enthusiastically involved in modeling poverty: “While poverty has become very chic, it is a prevailing negative excuse, the devotees of pleasure find it very hard to refrain.” “Baltimoreans Find Europe Alluring,” Baltimore Sun, June 14, 1931, p. SA13.
23. “Bicycle Ri
ding Fad Strikes Washington,” New York Times, July 31, 1933, p. 15.
24. “Is a New Car a Sin?” Wall Street Journal, February 18, 1932, p. 8.
25. Heffetz, 2011, p. 1106.
26. “Confidential Chat: Husband Lacks All Sense of Responsibility,” Boston Daily Globe, May 12, 1932, p. 18.
27. “Confidential Chat: Don’t Blame the Men; They Can’t Help It,” Boston Daily Globe, May 28, 1932, p. 18.
28. “Relief to Stay, Says State Director,” Pittsburgh Post-Gazette, January 30, 1936, p. 26.
29. Bewley, 1999, pp. 49–50.
30. Fang and Moscarini, 2005.
31. “Blue Jeans and Calico,” New York Tribune, April 13, 1920, p. 14.
32. Nerissa Pacio Itchon, “S.F.’s First Fashion Icon: Levi’s 501s,” San Francisco Chronicle, May 19, 2017, https://www.sfchronicle.com/style/article/SF-s-first-fashion-icon-Levi-s-501s-11153403.php. Lady Levi’s were first marketed as cowgirl or riding clothes, as in the Levi Strauss display ad “An Old Timer Advises the Dude Ranch Guest,” New York Herald Tribune, April 28, 1935, p. I13.
33. Judy Horton, “Dude Dressing,” Vogue, June 1, 1935 p. 121.
34. Sullivan, 2006.
35. https://www.liveabout.com/the-history-of-jeans-2040397.
36. “Briton Changes Name; ‘Becomes James Dean,’ ” Minneapolis Sunday Tribune Picture Magazine, January 5, 1958.
37. “The Country Is Off on a Jig-Saw Jag,” New York Times, February 12, 1933, p. 100.
38. “1932’s Bargains Different from Those of 1931: To Claim Poverty No Longer Chic—Furs and Shoes Are Discussed,” Washington Post, April 7, 1932, p. S6.
39. Piketty, 2014. See also http://piketty.pse.ens.fr/files/capital21c/en/Piketty2014FiguresTablesLinks.pdf. Table I.1 on that site shows the fraction of income accruing to the top decile in income in the United States 1910–2010, reflecting the dramatic rise in inequality since 1970.
40. Uchitelle, 2006.
41. Trump and Zanker, 2007. The title of the book was later changed to Think Big: Make It Happen in Business and Life.
42. Paul Blustein, “In Japan, Consumption’s No Longer Conspicuous; Consumers’ Newly Frugal Mood May Prolong Nation’s Recession,” Washington Post, February 28, 1993, p. H01.
Narrative Economics Page 34