The strongest section of this book argues for seven propositions of narrative economics. The warning that “truth is not enough to stop false narratives” resonates with too many debates in too many democracies.
Shiller has reanchored the uncertainty of human behaviour and motivation at the heart of economics. An appreciation of the magnitude of his achievement is better earned through his earlier works.
One might write a narrative of the past 10 years involving desperate central bankers trying to paper over the misdeeds of selfish and myopic politicians by keeping rates low and unwittingly brewing up a huge asset bubble and higher inequality. But can we actually quantify the effect of narrative economics? Not easily, says Shiller. He calls for more data — in the form of interviews that question people about the stories they tell each other and themselves, and a database of sermons that capture the most important passion plays of the day. Believing that easy money will soon give way to a market crash is certainly one. If Shiller is right, the more we believe it, the more likely it will be.