Robert Shiller | Narrative Economics

good afternoon everybody and welcome to the tony blair institute for those you who are guests my name is ian Mulhern and i'm executive director of renewing the center here at TBI and i'm delighted to welcome you all and those of you joining on our livestream to this sort of lunchtime ish special event and we're delighted to to be hearing from Professor Robert Shiller about his new book narrative economics now professor Shiller will be known to many of you as one of the most influential thinkers in the world he is was awarded the Nobel Prize in Economics in 2013 for his work showing how the value of asset prices fluctuates reflecting the irrational often irrational beliefs of investors about their their future path he will also be known perhaps more popularly if his work on irrational exuberance in the run-up to the dot-com bubble and his warnings ahead of the financial crisis - and he's the author of a number of important books including irrational exuberance itself fishing for fools and animal spirits but he's also very practical he's also been a very practical commentator over many years contributing lots of practical insights including the case-shiller housing index in the US which is the first of its kind and also lots of practical policy prescriptions such as why used to insulate households from the vicissitudes of the housing market and to use finance to really benefit people in their everyday lives and also concepts like financial valuation like the Cape measure and things like that so he's someone who has has a broad sweeper takes a broad view of what economics should be and the influences what the influences on it should be but it's also really the the think tanks kind of economists really in his practical application of those those ideas so his latest book narrative economics is out I think officially on the 1st of October and in some good book shops now I've been all of them would come October as I understand it and he he's going to be shedding light he sheds light in the book on some issues that economists tend to ignore really and about the power of stories to cause economic outcomes and indeed broader political and social outcomes and it's kind of timely as we worry about no deal and panic buying and things like that that we might tackle some of these questions about what narrative economics is what it means and how it might lead us to improve policymaking so we're gonna hear from Bob for about half an hour so he's going to take us through some slides and then we'll open it up to questions and get a good discussion going but Bob welcome and look forward to seeing what you'd say so this grew out of my presidential address with the American Economic Association two years ago I looked at other presidential addresses and I was surprised how many times they are critical of their own profession in front of their old profession but I'm not that critical I'm suggesting things that economists don't do that they could do and I'm thinking that we're under we're undergoing a change now that will lead to a different kind of economics that is more respectful of human nature so let me see so I'm going to talk about what I mean by a narrative economics and then talk about a medical epidemiology which I think provides a model for ideas going that's you saw it in the title of my book stories go viral and drive economic events stories like brexit or Donald Trump or other stories which have a surprising life because of contagion and so I want to learn from the medical people and the the theme here is that economic narratives are stories that are contagious and that affect human judgments about economic decisions so but that that was I just lost my train of thought the economics narratives are like diseases like influenza for example it's an awful way to do this to say this but uh they're they're contagious and they follow epidemic models and then they die out eventually as happens with disease epidemic unless there's a mutation or an environmental change so influenza is not one disease it's many disease with a similar structure same way we'll see perennial narratives so I'm gonna come then to some of the examples I'm not going to cover all nine here I gave nine examples of perennial narrative which like influenza keep coming back that is a concept that I think totally absent from the economics literature there is something in the literature Department that will talk about basic stories there are people who write like Andrew Tobias wrote the seven fundamental stories for all literature it's controversial but I'm under that wavelength here and then talk about the future which i think is something that I don't control and own but I'm predicting that there will be more attention to this so that's my book it's oh the difference between behavioral economics and narrative economics behavioral economics is about psychology about it has a method adopted from typically most of the time method adopted from the psychology department am i blocking you and the the methods are experimentation and observation looking for principles of human nature that are stable through time whereas narrative economics is studying something different it's studying this whole array of narratives that that recur and it's more like entomology that classifies different kinds of insects okay you list all the different species so it's a different approach to economics so the Palgrave dictionary of political economy in 1894 does mention narrative economics but it meant something different narrative economics in 1894 was economists writing narratives about financial crises er it chronologies what I'm talking about is not writing chronologies about economic events it's about writing about the popular narratives that the general public thing the idea is that economic behavior is not constant through time it's shaped by ideas and the way ideas spread is through among the general population forget economists we're talking about real real people who I make the decisions that they tell stories so for example a criminology is well aware of this one criminologist was was saying that trying to understand how criminals think that's part of what so he visits a jail or prison and has the opportunity to interview prisoners so he tries out at first you ask the prisoner what is your philosophy of life and gets a blank answer they're not our ticket they can't describe their philosophy of life and that's not thinking in those terms but a better way is to say hey that prisoner over there what's he in for and then they love to tell they know every prisoner story and when you listen to his story it's a human story you detect morals the prisoners have us they don't think that they're bad people they think that they're moral people in operating in a difficult world so that's how we have that's how ideas about economics spread among the general population and some narratives occur in constellations that is people love to hear about Boris Johnson because they're all interested in Boris now so there's a whole array of Boris Johnson narratives I'm also thinking of Donald Trump I'll come back to you've probably heard some of that even though it's not your president so actually what I'm arguing for here is for Anna taking account of the understanding about narratives that occurs in other social sciences so what I'm doing is not very interesting to some reporters who think about narratives all the time when they're bringing an economist they expect us to be quoting statistics about GDP or something and not about what somebody said the other day but actually yeah so what I did using JSTOR search for the word narrative in scholarly journals and the black bars is the percent of articles scholarly articles with the word narrative in it by field all the way back to the beginning of these journals and the the blueish line the like line is in the last decade so you can see two things first of all finance is the worst in terms of mentioning narratives they do though that much and economics is the second worst also every single field is growing in their attention to narratives this is as percent of the articles so it's not affected by the size of the literature and I think that I come back I think that has partly to do with the availability of data in terms of digitized text and the ability to search and do natural language processing I think it is a revolution that's starting a profession depends on data and the data available in 1930s in the Great Depression we got the first data on unemployment rates GDP stock price index of what they were a little earlier but the the data change and we were changing the response that's a healthy response to the data also I wanted to say that I called my book and adventure and Concilium I took a little worried about that that if someone might make fun of this but maybe you don't know what Concilium is the term Concilium was coined by william Hewell who was a professor at Trinity College Cambridge in the 1740s thereabouts it means the unity of knowledge he was a philosopher of science yo Wilson a biologist wrote a book called Concilium sin 1998 which influenced me saying that you can't professions tend to home in on a certain methodology and it becomes narrow and with time and they don't see all the ramifications they have to be listening to other fields so I ended up studying a lot of reading literature a lot of literature like for example the medical literature so I think that we have to think of ideas as in any cases epidemics so this is an actual epidemic this is the Ebola virus --ml outbreak of the Ebola virus it's not everywhere you know it's certain places where for some reason the environment suddenly changed in favoured Ebola contagion or or I don't think it was a maybe it was a mutation in the disease but in Lofa County Liberia these are weak numbers the epidemics was growing and growing and then it comes down and disappears now this was partly due to Doctors Without Borders that came in and helped them but even if they had they would still follow this trajectory and that's what epidemiology studies so I'm going to apply that to economics this is a couple of epidemics that you may have heard of first one is bimetallism some it follows us it looks like an epidemic curve so it started out in 1870s and it was just growing it wasn't weeks it was years but in 1894 there was a London conference on bimetallism you can read it it's on the web there are conclusions but it was biggest I think in the United States and there and then it faded away what is benevolence and by the way you don't need to know that but it is a it is a theory that there should be two coins silver and gold whereas the pound sterling at this time was just gold although they had subsidiary coinage that's not the point is it's an epidemic and if you go back and read newspapers at that time some people observed everybody's talking about bimetallism and and it was accused they were accused of stupidity they were insulting each other it was a polarization of society along this you you might find that hard to imagine but it looks like the polarization we are observing with brexit today and it was geographical in the United States it was the from the rural areas and the cities were all for the gold standard coming out yeah we come to Bitcoin it looks to me just like bimetallism repeated its both about the money supply it's both a supposedly a resounding ly good idea that you'll never understand unless you're a young person today and everyone you think you've noticed this right there's lots of technical innovations but something went viral on this one I had something to do with this story Satoshi Nakamoto supposedly invented this but nobody can find him what a neat story and it keeps coming up with impostor it's claiming to be him it has other kind of appeal which I could talk about so this is a I'm going to have to not spend much time this is the most famous original epidemic model bi hurmati Mackendrick in 18:27 and it led to a literature almost a hundred years about there's many variations on this model but it's called a compartmental model there's three compartments susceptibles infective that's i and recovered are and in this in this story i'm telling this disease is never fatal you are what you become immune for life after you've had it after and basically I just quote them all three of these compartments some to one I have it an addition maybe it just makes 100 percent look at the middle equation the change in the number of infective maybe I should stand over here it of this is better because you're just I'm optimizing here is equal to a contagion right C times s times times the I minus R times I so CS has to be greater than R for the epidemic to grow the contagion right has to be above the recovery rate and you've got this is a solution for a certain initial condition that I picked here one there's a million people one of them is infected and the the number of effectives goes through this curve which he is called the epidemic curve but that's what we saw with Ebola it rises for a while and as a number of system is a number of in fact susceptibles he goes down and the number of recovers goes up and eventually there in this case it asked some toasted zero but what does the real lesson is you see these outbreaks like in Lofa County Liberia and you know why is it happening here you know it's it had many opportunities to have an effort in suddenly it did it has something to do with contagion and recovery but probably there was something that made it contagious at that time in that in that County so then the question economists look at narratives and think that they're meaningless they just talked and we don't we talk about real economic forces like depletion of natural resources technological progress also stupid things central bankers do mistakes by the government but never about these narratives well and so there is a literature outside of economics that shows that narratives actually feed back into human decision there's a causal impact and I won't go through all these in the interest of time but we know that people are not immune they'll hear a story about some charismatic person or and they're just imitated even subconsciously that it ends up affecting their behavior so and they occur in constellations I've already said that Donald J Trump to me is an amazingly brilliant constellation when I come home from work and talk to my why would I say what's the news what a Donald Trump say today it's in the head of the news every day so he has somehow really attracted attention but models go economic models go through the same epidemic curve so here's for economic models the is-lm oh they're they're old I had to take old models that I wanted to see the whole epidemic curve is LM out a real business cycle model overlapping generations model multiplied our accelerator models well there's a lot of jaggedness in here but the overall pattern is a hump shaped so I have economists talk I'm sorry man I won't go through this much but one of those models is a multiplier accelerator model from Cannes and and as that adapted by Samuelson and it yields pump shape patterns and it's in a different way through feedback but when when when something shocks 'command a government expenditure then consumers start spending more and businesses start investing more to accommodate the demand and the economy grows for a while and then it flattens out at a higher level because of the new stimulus but I think that we need to modify these models to take account of the other feedback that's occurring through epidemic so an example is the Laffer curve I think that had if some of you might not remember this but if you're in my generation you remember it in 1978 Arthur Laffer drew this curve at dinner on a napkin and this curve was taken to justify cutting government taxes tax rates saying it won't affect revenue because it will stimulate the economy so much that you'll end up with higher revenue with lower taxes it was a story that went viral in starting in ninth we'll have a curve for it it's coming he's going viral again this is a perennial merit nobody ever said Laffer curve until it appeared in a book by jude wanniski in 1978 then it just soared and Margaret Thatcher got elected or became how do you say it Prime Minister well on cutting taxes and then around here Ronald Reagan got elected fifth they had it's not just this narrative but this was a prominent one in a constellation of narratives and then it died out as occurred but now here something happened and it's going epidemic again why should it do that well I think we have to think like epidemiologists we can't think like traditional economists we don't even look at plots like this I have two books and these news and newspapers both of them follows roughly similar patterns and here's famous economists there are all the epidemic now I could be wrong that it's not simple contagion but I think I'm not they're all epidemic curves this is depressing to young people who imagine that you will be eternally famous someday you're the best you can hope for is that your fame will outlive you but it will eventually collapse someone lucky people Karl Marx the communist wasn't that famous I didn't put it up here I didn't want to get too political he died in 1881 he wasn't that famous he peaked in the 1970s so that's the best you could hope for so I have a list in my book of nine important for any other economic narratives and I'll just go through the first few and then stop this is the panic narrative so I've got a number of panics the panic of 1837 the panic of 1857 these are all financial panic they're all bank runs really people rushing to pull their money out of the bank because they heard the bank would fail panic of 1873 panic of 1893 panic of 1907 now the internet each has shown separately but you notice that as a group they're all going through the hump shaped pattern together so this is 1837 no mention of the panic of 1837 and 1837 they didn't think that way in fact if you look at the accounts that was more describing the banks of having made mistakes or the or the president was had made a mistake in shutting down the second bank of the United States they tend to concentrate on what the politician said but you can see that the panic of 1837 which is a heavy line started growing at the same it's at the same time as other apparent people were talking about the panic of 1837 the most in 1907 and then it just faded there was a huge panic banking panic in 1933 but they didn't call it that now the words matter you might say it's just words maybe they had some other way but my reading is they were becoming more psychologically aware the word panic suggests a psychological state and it becomes a self-fulfilling see not every single time but in back here you didn't go running to your bank because you wanted to be the first to pull your money out before the panic got further away because people didn't talk about that so you didn't you did have bank failures but it wasn't quite the same anyway or maybe I'll move ahead because I wanna stay within a half hour I can also the the words describing confidence started to build there wasn't much talk about these different terms until well and well into the 1850s in the English language literature and then it went up and it peaked around the around 1907 again little bit after and then it's been declining financial panic but business confidence came later and then consumer confidence came later still so now the major the most cited confidence indexes are consumer confidence we're thinking that consumers will stop buying it will cause a recession they didn't talk about recessions until 1938 but now we're thinking about buyers pulling out because they've lost confidence these are models of the economy that the public has it's not doesn't matter what we academics say another model of the economy is the model of the Great Depression of the 1930s starting with the 1929 stock market crash everybody still knows that the 1907 panic I bet not with less not more than 1% could identify that that there was even a panic in 1907 but the story of the Great Depression was a turning point and but the interesting thing is they didn't talk much about the Great Depression in the Great Depression even though Lionel Robbins wrote a book in 1934 called the Great Depression and he was somewhere in the UK he was LSE maybe he was am i right okay so you can see that the Great Depression was growing for 50 years this reflects an underlying truth about epidemics there are both slow epidemics and fast epidemics Ebola tends to go fast in a particular place but AIDS is a very slow epidemic because contagion isn't that high but it lasts the recovery rate is very low so it depends on those two parameters if you stick with that simple model so the Great Depression was what's growing and then suddenly this data set for books stops in 2008 but we're just the wrong time to stop but this news in newspapers source shows the incredible spiking of Great Depression people thought suddenly this latent narrative of the Great Depression came back and they thought we were really we are we are really repeating the Great Depression now and another of my of my perennial narratives is the well it's a opposed there are frugality narratives and modesty narratives and there are conspicuous consumption narratives so leading in the u.s. at the present time is a conspicuous consumption narrative which is peculiarly American and has led to our donald trump president and also to the one of the strongest economies outside of Asia until maybe just now so he he keeps right he doesn't write books he hires people to write books and they in the Meredith McIver is writing but she's good yeah nobody could this is Donald Trump type words she interview him she knows what he's thinking so I found it amazing and he would talk like this so he assumed you want to learn to think like a billionaire right no he asked you it takes practice can you confidently name the top five jewelers and world can anyone name them see this is your this is why you're not a success you haven't adopted it's a mentality I'd say he has a chapter on undress and he tells you what's really good this is your route to success I couldn't believe he talked about the best cufflinks okay the best cufflinks are the Trump five-star diamond cuff later there you want to run out and buy these so you can be a success I keep them on hand to give to people as gifts and they are great looking I also wear a solid gold cufflinks from time to time of course that's what we're doing that's not good enough has to be Donald Trump recall thanks he's apologizing that they're not solid gold but I know I don't know how to prove that this is affecting American thinking but I think it's affecting not just the billionaires it's affecting people lower rungs on the social ladder who feel that they have to keep up appearances I'm going to contrast that with Winifred Holtby does anyone know who she is she you should be remembering her rather than Donald Trump she was a columnist in the 1930s for the Manchester Guardian used to be called the Manchester Guardian there to be so she's in talking about life in the great depression and saying that you know we don't really have to spend so much money we can live can we not use this period of the depression to get rid of a little snobbery and Buncombe and live lives dictated by our own taste instead of our neighbors supposed notions of what is done with so much to do in a world so rich in experience unless we shut ourselves up in the little genteel compartments in which we all adopt the same arbitrary standards where are the same things eat the same things and produce the same sad monotony of appearances reading people like her and they tend to be women I think maybe that's a bad generalization but maybe they were I think that maybe the depression was a better time to be alive than the roaring 20s that preceded it someone another woman said you know people are just nicer now in the depression they're forgiving people give money to beggars on the street and I used to consider that they were professional beggars and wouldn't do it here's the American Dream have you heard of the American Dream what is it well it's something like it's okay to be rich because everyone else has equal opportunity and they'll be inspired if they see you with your gigantic house oh and then monetary I wasn't coming back I better wrap up here but this is why didn't people get so excited about bimetallism well one thing there was a spinner of narratives William Hope Harvey who wrote a book coins financial school which you own you just take your cell phone and search for that and it's past this copyright and you can read it it's like a comic book it's about bimetallism and this boy he's a boy is lecturing to business people and about the advantages of bimetallism and they think he's an upstart and he's even what's this boy talking I know why he's talking to them and he they way to raise objections and he would always some outsmart them and why did this sell a million come it's these rural people out there in the countryside felt that ashamed of themselves or something that they weren't it was a depression they were having hard times and they read this comic book story about fooling or showing up these people somehow went viral and that accounts for bimetallism technological unemployment is another theme about labor saving machinery stealing jobs I just gave us someone told me it goes back to Queen Elizabeth the first Queen Elizabeth the first made a statement that technological unemployment is damaging lower-income people it goes at least that far back but it showed up in the Great Depression you know what I'm referring but they had a different word for it they used to say labor-saving machinery is replacing human jobs then they called it technological unemployment so it looks like a new name for something it makes it more viral and people thought a lot of people thought in the Great Depression that the Great Depression high unemployment was caused by robots that were coming in they called them robots already in the how you can say how can they think that in the 30s well you have to go back and read what they were saying so let me give you one example this is Albert Einstein you've heard of him he has a strong narrative that is going on today much more than any other physicist and it's because he said colorful things like he said about he would opine on the great depression so he said this in 1933 according to my conviction it cannot be doubted that the severe economic depression is to be traced for the most part to internal economic causes the improvement in the apparatus of production through technical invention and organization has decreased the need for human labor and thereby caused the elimination of a part of the labor from the economic circle circuit and thereby causes a progressive decrease in the purchasing power of a dollar of the consumers we don't even that's not part of the narrative today at all about the depression it's a common most commonly a confidence narrative but this is a plausible cause these part of the cause of the Great Depression if people thought that they were going to be replaced by a machine there might be more cautious about spending money so this is my last slide I think that narrative economics it's not mine I just wrote a book with that title but I think it's already happening people are already doing research that uses digitized text the new technology is also changing the parameters the contagion and recovery parameters and we need to study that I think there will be new forms of economic theory like the Keynesian model Keynes is almost a behavioral economist I don't know about a narrative economist sort of maybe back he's a great story but I think we have to combine models with epidemic models and I think we should be collecting better data on economic narratives now organizing it so it can be available in the future I'll stop with that thank you Bill okay before we open out to a bit more of a broader discussion I wondered if I could push a bit on the implications for sort of policy and what you kind of see is well how you hope this agenda might might be progressed because I guess that you could see the idea of being aware of the impact of narratives and their importance it's just something that's useful for economists to be more aware of but you could go all the way to the other extreme of saying if we could sort of build this into our forecast better maybe there's something we can well well think forecast better yeah so I don't mean to boast but I did say in a book that it came out in 2000 that I thought the stock market was vulnerable and a recession could occur and then in the second edition I forecasted the financial crisis not exactly I didn't say the most confident forecast but I said widespread bank failures is a serious possibility coming soon yeah and what did I base that on I had no mom no I don't think this has evident it to me it's evidence I'd know what was I amazing I was basing it on the crazy narratives about real estate that I was hearing but he's you will hope that it's an informal sense in which people have it have an idea about the importance of narrative and they use that to say look on balance it looks like the stock market fundable or is your hope that quantitative you can embed this well what yeah one thing about McCann do the same models that epidemiologists do and help and that may help us forecast yeah but I haven't really reached final conclusions about how to do that so looking at the real estate market in the United States right now I have not been making confident forecasts but the real estate was going up in it didn't it bottomed out after the financial crisis her into our own indices in 2012 it then it started a rapid ascent at about 10 to 12 percent a year for a few years and then it slowed down to 5% a year and then it slowed down further to 3% a year with the latest data the this tends to be a hump shaped pattern and I don't have great confidence in it but it's not like the stock market because it's not a liquid market and it doesn't allow it's harder for smart money hedge funds to trade in and out of it although they do yeah but I I'm thinking that that may be our forecast I would like to keep it if I were back I used to forecast in the Wall Street Journal home crisis for a while in the 1990s but it was gotten too monotonous we were always predicting increases but if I were to get back into that I would try to think about epidemiology of narratives but that's a big project I don't know how to do that and maybe someone else will do that yeah and it won't of escaped your notice coming to the UK this week of all weeks that there's a lot going on in British politics at the moment and obviously lots of debate about whether we'll be facing and no deal brexit and lots of questions floating around about how prepared are we for a No Deal BRICS can we ever be prepared and I suppose one of the things that one can't it's harder to be prepared for is what kind of narratives might starts to emerge that might cause people to panic panic by so there's a perennial narratives are there I'm sorry yeah up to you but yeah I mean I I guess I just wonder what you think if you you know if you were advising policy makers is there something they can take from this kind of way of looking at the world might help in planning for this well I'm worried that the next recession that we're talking about so much now this is itself a narrative induced I can talk about that but it's also maybe a severe one because of the big attention that's being paid now to artificial intelligence and I think young people today maybe you can tell me I'm wrong but young people today are worried about their long-term future they're gonna live to be a hundred years old and are you gonna somewhere along that line be replaced by a machine like Queen Elizabeth the first word I think the it has a potential to come but that's what happened in the 1930s that the the technological unemployment narrative was already starting in the 1920s the roaring 20s and Stuart chase wrote in 1929 I think a book about technological unemployment which was talked about a lot so here we were in 1929 where there was a great talk about the higher they thought that they didn't publish unemployment rates regularly but there was a government study that suggested that unemployment is higher than you'd think even though we were prosperous and so it that led people to think that it was caused by technology advancing and they have lots of narratives about what the machines are doing now they had conveyor belt assembly lines and automatic things happening already and so when the unemployment went up in the Great Depression a lot of people not just Einstein thought this is it this is the major turning point that will be recorded by historians when the machines took over turns out they were wrong at that point of time but the the narrative is still there and I don't know if any of you feel worried about how about this we don't know what's coming next they're talking about not having a like any hearted hearing aid that you can put in your ear and when someone speaks to you in a foreign language it will automatically translate it into it would detect the language and translated it into English you can walk anywhere in the world it when this happens you don't need to learn a foreign language they'll have these two and you just strike up a conversation with anybody things like that are coming and out of if it scares you maybe it doesn't and the reason it doesn't scare you is because nobody is talking about it now but if it were if it it needs the contagion they get going once it gets going then you will get scared about it and then that's when this will be turning into a severe recession okay [Music] all sorts of information right yeah so that's a important question and that's why I and the animam I want more data collected in the future I'm limited by what is there and but I've already tried meeting Diaries there are collections of personal Diaries so I was recently reading a 14-year old girl's diary from the 1930s I felt like I better stop this is I've been Trudy got her but she's probably dead now all right so I don't even know who she was she wasn't very helpful she did not have many economic negatives even though it was the depression it was mostly about boys but I think that we can you can search that they're not randomly selected Diaries it's the same problem so I think that we can start a drive to collect do you have does your grandmother leave behind a diary if so we'd like to scan it in and the other thing I've started looking at but not too systematically as church sermons because people are very influenced by religion and maybe less so now but they used to go to church and I I went in with a Yale Divinity School and tried to get a librarian to help me find digitized church sermons and there are available but they seem to be in and websites written for pastors who are about to write a sermon and they can steal from another another famous person Siri sermon I don't want the famous preachers sermon I want to know what the everyday guy was and I don't know if that is Digita reason collected so the other thing is focus groups we have a skilled leader of a focus group will bring together people of a certain persuasion or like truck drivers and will oppose quite trying to find out how they really think about something but are you getting them in a discussion and this is an art maybe it's a lot of these things require human judgment and this brings me back then to the literature departments of the universities of the world which have a very different tool bag to explore ideas but what is it about a successful novel or a successful story we don't yet have ways to be precise so we end up isolated in our departments miss you may miss some of the obvious things from what team yeah right and they've spread around the world yeah that's a difficult difficult question I don't clean just for the benefit of people on the live stream the question was what's the capacity of government to affect those contagion rates and ideas right I was thinking that some government intervention in publications has been around for thousands of years and what comes to my mind is the libel or character assassination if you make up lies about someone and impugn their characters they can sue you for that and that's usually a civil trial and you would get damages but we don't know if we have a public if that is kind of necessary because people do that and it ruins people's lives but if we've been able to do that it doesn't seem to be misused that much I don't know I'm not an expert in the law we can do something like that on the public for the public interest and if someone incites I wonder why Hillary Clinton didn't sue Donald Trump for calling her crooked Hillary or the Clinton crime family with with no evidence maybe she should have sued him she decided not to so nobody does anything about it I have answers to your right now the Greek crisis is an interesting narrative event I'm talking about the is it 2009 the there were protests against Greek government was facing a budget problem and so they were talking about raising the retirement age and retirement age differs by occupation it did in the Greece but some people like hairdressers were allowed to retire at age I think it was 55 for their health because they inhale fumes from the chemicals they put on people's hair and that became a story that was very popular in Northern Europe about those southern I won't say that what the prejudice about but it sounds very Greek to them that that you would be complaining about having to retire at age 57 instead of 50 you know a lot of people are 57 and they're still quite capable of working so that was that went viral and it actually started to affect it's hard to call the Greek that into question and then it fed the egos of people who think that we're more responsible and it's bled over to Italy and Spain which we're thought to be populated by similarly not reliable responsible people and then it exploded it caused it was a self-fulfilling prophecy again so I don't know how do you research these narratives so you are you know that I didn't mention that the social media is another major source of digitized text and you can search on Google Trends that's the easiest thing to do oh yeah describe more stable well one thing that comes to my mind is that in the early 1920s there was a movement funded by some I think real estate people called the own your own home movement and they ran ads in newspapers showing a picture of a home and this is in the 20s and it showed an argument that it's okay to borrow to buy a home they were they were trying to educate the population out of its feeling that that is bad and responsible families would never go voluntarily in debt well that buying a house is the America it couldn't say American dream yet that wasn't that wasn't invented yet but these ads have been continuing there are other groups so it was a big campaign to get people to accept taking out a mortgage to buy a home and it's still it's still recently going on the National Association of Realtors in the US run ads advocating home ownership so and they're financially interested in this outcome so the question is whether there should be something like campaign laws that we have for elections that would have restrict this kind of public advertising again I'm not advocating policies in this book it's it's a project this is too big for one man to bigger project but that's interesting because in some of your other books you talk about financial measures that can insulate people from the volatility it's almost like it points in the direction of perhaps measures that dampen the narrative ala jealousy of the housing market is perhaps the generative czar hard to predict so I was we started a futures market for single-family homes at the Chicago Mercantile Exchange case and I and it's still going but it's never gotten really it's never gotten much but it looks like it was taking off in the first year and then it just faded so it's hard it's like trying to make a hit movie or a hit novel maybe our timing was off we had the financial crisis and that was the end of our my not totally the end of the mark I there's someone who's still trading there and I'm not sure who they are or where they come from but there are some question but how can we be sure we're right and then second best relating that to one specific narrative I wonder whether you've looked at climate change it's a good project I haven't I haven't done that one of my pro-trump relatives sent me in this paper article that he said was from the Washington Post 1922 which described climate change as if it was happening then and I said I don't believe this it looks to dr. it's too close to what we're saying now his point was that they set it back then and it didn't happen so I looked at I found the article and it had been doctored nothing exactly they made it updated it a little bit so having a serious study of climate now actually the narratives about climate change going back a hundred years tended more to be about exhaustion of natural petroleum and there was there were oil price scares in the 20s I think and maybe also at other times they thought we were about to run out we've just invented the automobile and there isn't that much oil the whole thing is going to fail because we run out of oil that turned out to be way off the mark and so there's also discredits people who talk about climate leases that is correct that there was an oil price fear in the 1920s that turned out to be way premature we have times and your other questions oh the car well I had one slide on this where I near the beginning where am I oops there yeah there it is we know that narratives that narrative expositions of stories that involve human interest that the person identifies with maybe that have a visual image my quotes Cicero the Roman senator from 2,000 years ago he has a book on rhetoric and he advises you about how to write and Cicero said keep visual images in your speeches because he said the mind is very attuned to visual images and so some of these the the law well not just the last that I have shown by Bill they did a mock trial of a criminal where they had I suppose students pretending to be a jury it wasn't a real trial but they were presented evidence a lot of the guiltiness of a certain accused and they did it in two different ways that the the the evidence was presented in a bland way and in one and they can any control group and in the experimental group they judged it up with just colorful details so it was a nice story so in the sticks in my mind from the from the jazzed up version of the prosecution is they said the the accused lunged at the victim in the process knocking over a bowl of guacamole dip upside down on a white shag carpet okay well whether he knocked over the guacamole dip his isn't relevant they added that in the souped-up version and they found they were better able to get conviction so if they made it into a narrative instead of just a dry fact oh and in journalism myself mark Hill they want to present some evidence air pollution and so they had two different news stories for television one of them was the news story just had a scientist quoting statistics about how air pollution is creating diseases the other one they didn't they forget the scientist we go to a baker who has asthma and he was suffering from asthma for years and finally he got angry because these these polluters were just not we're not behaving well and he he made it his life's work to battle against these polluters that was just remembered much more strongly than the scientists talking they teach you this in journalism school when you write newspaper articles you don't start out with the facts you start out with some story like that and it's just human nature to remember that so I take these things as examples that that the creative element of a narrative is the guacamole dip was a creative idea that the writer of the narrative had and it made it work just as the napkin in the art Laffer story made that work so but with so in a sense it is an invention of sorts that often drives the economy but it's it's an invention of creative spirits who tell stories it can also be traditional economic causes who are not ruling them out good to know that we're not entirely redundant as economists it's just after three so it's time for us to call it to a whole but thank you very much and you're giving us a awful lot to think about narrative something that I suppose in other walks of life people think about all the time that economists generally try and ignore them and we're trained to ignore them yes exactly but do read the book it's it's full of fascinating examples and fresh thinking on how to approach some of these things so thank you very much for coming and joining us and thanks to all of you who joined us on livestream [Applause]

Channel: Tony Blair Institute for Global Change

Views: 13,928

Rating: 4.8095236 out of 5

Keywords: Tony;, Blair;, Institute;, Foundation;, TBI;, Robert Shiller, Yale, Economics, nobel, author, book, narrative economics, London

Id: Kas_nKhBcQk

Length: 62min 0sec (3720 seconds)

Published: Wed Sep 11 2019