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Blink 3 of 8 - The 5 AM Club
by Robin Sharma
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Narrative Economics summary
How Stories Go Viral and Drive Major Economic Events
25 mins
Brief summary
'Narrative Economics' by Robert J. Shiller delves into the study of popular stories and how they affect economic trends and behavior. It proposes a new way of analyzing and predicting market phenomena through narratives.
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Narrative Economics
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Narrative economics considers the collective stories that change economic behavior.
When you watch an economist on TV, you’ll notice that they’ll nearly always speak in figures. You’ll hear them use terms like “GDP” or “inflation” describing a past stock-market crash or an impending recession.
In an economist’s world, it can often seem as if the economy lives independently from the rest of the world, on a purely numerical plane. Economists rarely, if ever, try to explain the economy by referring to people’s fears, hopes, or prejudices. And they’ll often leave out our messy human stories, which are just as crucial to understanding big economic events. That’s where narrative economics come in.
The key message here is: Narrative economics considers the collective stories that change economic behavior.
First, to understand the phrase “narrative economics,” we need to consider the modern use of the word narrative.
Rather than simply referring to something with a beginning, middle, and end, a narrative can describe a collective story or belief shared by a group of people. Take the “shrewd businessman,” a popular narrative in the United States. In fact, Donald Trump capitalized on it to appeal to voters. Whether or not Trump is a shrewd businessman doesn’t matter – he successfully hitched himself to this narrative and played up his credentials as a tough, wily operator who’d get the best deal for the country.
And, of course, that particular narrative had a real effect. It helped Donald Trump get elected president.
Now, take the stock-market crash of 1929. In the years before the crash, there were lots of popular narratives flying around. There were stories of ordinary people gambling all of their savings on a particular stock and becoming enviably rich. Of course, this led more and more people to make bad investments, culminating in the big crash on October 24, 1929.
Narratives should form part of our understanding of any big economic event, but often, they don’t. While economists have rarely focused on stories, there has been one notable exception – Cambridge economist John Maynard Keynes. Rather than simply refer to figures, Keynes made a note of public feelings at play. In his book Economic Consequences of the Peace, he predicted that Germany would become deeply embittered by the heavy reparations they were required to pay after World War One. No purely quantitative analysis could’ve told us that.
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What is Narrative Economics about?
Narrative Economics (2019) describes how popular narratives influence the way economies behave. From Bitcoin’s sudden rise to stock-market crashes, Narrative Economics looks beyond the statistics to the collective human stories that drive these events.
Narrative Economics Review
Narrative Economics (2019) by Robert J. Shiller explores the powerful impact of popular stories on the economy and provides valuable insights into understanding economic fluctuations. Here's why this book is worth reading:
- Through compelling examples and thorough analysis, it reveals how narratives shape our economic behavior and decision-making processes.
- The book offers a fresh perspective on economics by highlighting the role of stories in shaping market trends and influencing economic outcomes.
- Backed by extensive research and academic rigor, it presents a thought-provoking argument about the importance of narrative in understanding economic events.
Best quote from Narrative Economics
The concept sounds like something that most people would find dull and boring. But, somehow, the Laffer curve went viral.
—Robert J. Shiller
Who should read Narrative Economics?
- Financial analysts looking to broaden their horizons
- Forecasters of any kind
- Anyone interested in the economy and global events
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Narrative Economics FAQs
What is the main message of Narrative Economics?
The main message of Narrative Economics is that stories and narratives have a powerful impact on economic behavior and can shape the course of economic events.
How long does it take to read Narrative Economics?
The reading time for Narrative Economics varies depending on the reader's speed, but it typically takes several hours. However, the Blinkist summary can be read in just 15 minutes.
Is Narrative Economics a good book? Is it worth reading?
Narrative Economics is a fascinating read that explores the influence of narratives on economic outcomes, making it a worthwhile book for anyone interested in understanding the interplay between stories and the economy.
Who is the author of Narrative Economics?
The author of Narrative Economics is Robert J. Shiller.
What to read after Narrative Economics?
If you're wondering what to read next after Narrative Economics, here are some recommendations we suggest:
- Who Can You Trust? by Rachel Botsman
- Phishing for Phools by George A. Akerlof and Robert J. Shiller
- The Ascent of Money by Niall Ferguson
- The Dark Net by Jamie Bartlett
- Moneyland by Oliver Bullough
- Think and Grow Rich by Napoleon Hill
- 2030 by Mauro F. Guillén
- The Algebra of Wealth by Scott Galloway
- The Shortest History of Economics by Andrew Leigh
- This Is Why You Dream by Rahul Jandial