Robert Shiller on Epidemics of Narratives – and the Corona-Crisis

Nobel prize laureate Robert Shiller is the expert when it comes to narratives in economics. We had the chance to talk to him this monday in an exclusive Forum New Economy seminar about his new book, important narratives and the parallels to the current crisis.

 

Part 1:

Robert Shiller has been known for many years as an expert on exuberance and panic in financial markets. For some time now, the Nobel Prize winner of 2013 has been trying to understand how narratives spread between people and thus drive economic events. He wrote a book on this topic – which was recently published in German – and for which he has also studied intensively the spread of viruses. He did so without anticipating the dramatic corona crisis that has spread worldwide in recent weeks and that his expertise on the spread of viruses and especially the effects on the economy and financial markets would be all the more relevant.

On Monday, March 16, we had the opportunity to talk to Robert Shiller in an exclusive Forum New Economy Seminar – via video of course. It was the first time he had ever made a presentation from his private study, said the 73-year-old.

Here are some of Shiller’s most interesting statements during the seminar:

“I call for a different approach to economic research – to take account of viral narratives. We are living in a world where narratives are like viruses; they spread from person to person by contagion. And the contagion is not necessarily reflecting the quality of a story but the storytelling vigor or interest so people will repeat the story to other people and the story will spread by contagion.”

“You can’t have a bank run if nobody has ever heard of a bank run and has no consciousness of the possibility of it running out of money.”

“I wish that economist would recognize the reality of these stories and their effects on our thinking. This requires them to think more like humanists and trying to understand the emotional appeal of certain stories. But that is what I think we have to do to make our economics more relevant.”

Participants in the seminar:

Stephen Brenninkmeijer – Chair of the ECF’s Supervisory Board

Marcel Fratzscher – President, DIW Berlin

Maja Göpel – Secretary General of the German Advisory Council on Global Change

Caio Koch-Weser – Chair of the Advisory Council of ECF

Brigitte Preissl – Former editor-in-chief, Wirtschaftsdienst and Intereconomics

Jörg Rocholl – President, ESMT

Moritz Schularick – Prof. of Economics, University of Bonn; Fellow and Grantee, INET

Elisabeth Wehling – University of California, Berkeley

The most important quotes on the Corona-pandemic:

“You wanted to know how to stop a narrative? You have to develop a counter narrative, something that is also contagious. That’s an art, rather than a science.”

“I think that we are trending towards developing a situation where the state and the market are coming to a better balance.”

“Letting the health care system collapse is not a good thing for the economy. The image of having the triage and sending people home to die because there is no ventilator for them… that is a story that will be remembered well for a long time. And that will inhibit – I think – risk taking for a long time.”

“I think the Corona virus is analogous to the climate change because it is a shared world phenomenon – we have to get cooperation from different countries to contain the sources of contagion and it’s difficult.”

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