Prof. Robert Shiller, the Sterling Professor of Economic and professor of finance, gave a talk at the Chicago Humanities Festival in November 2017 titled “Belief and the Economy.”
In the talk, Shiller explained that a powerful narrative can move through the culture with a pattern similar to an epidemic moving through a population—that is, it can go viral. He cited examples including Martin Luther’s launching of the Protestant Reformation; economist Arthur Laffer’s “Laffer curve,” used to argue for supply-side economics; and stories about “flipping” houses that helped to drive the real estate bubble.
“It’s not related to any variables that you might think of,” he said of the rise in real estate prices in the 2000s and again during this decade. “So I think it’s a story. It’s a narrative-driven event.”
Shiller, who shared the 2013 Nobel Prize in economics, is the author, among other books, of Irrational Exuberance, about the nature of speculative bubbles, and, with George A. Akerlof, Animal Spirits: How Human Psychology Drives the Economy and Why It Matters for Global Capitalism.
Watch the talk: