Tell me, are you planning to read any good books over the break? Maybe go to the movies? Certainly, watch a fair bit of streaming video? I bet you are. And I bet most of what you read or watch will be fiction.
If it’s non-fiction, it’s most likely to be a biography – the story of someone’s life.
How can I be so sure? Because, though it’s taken economists far longer than anyone else to realise – and many of them still haven’t read the memo – humans are a story-telling animal.
It’s something psychologists and other social scientists have long understood – although, being academics, they prefer to use the more high-sounding “narratives”.
Humans have been telling themselves stories since we lived in caves and sat around campfires. The eminent American biologist, E.O. Wilson, said storytelling was a fundamental human instinct. Evolution has wired our brains for storytelling.
Jonathan Gottschall, author of The Storytelling Animal, says we are, as a species, addicted to stories.
“Even when the body goes to sleep, the mind stays up all night telling itself stories,” he says.
You can say we like telling and listening to stories because we enjoy them and find them entertaining. Sure. But why has our evolution programmed us to enjoy stories so much?
Because stories add to our “fitness” to survive and prosper as a species. Because stories are the way humans make meaning out of the seeming chaos of life.
Gottschall says storytelling “allows us to experience our lives as coherent, orderly and meaningful”. Another author, Peter Guber, says stories have helped us share information long before we had a written language.
We turn facts we want to remember into stories, and we remember facts embedded in stories better than facts that aren’t.
Stories engage our emotions, not just our intellect, which is what makes them so powerful. We don’t remember much of the key figures and facts summarising the seriousness of the latest famine in Africa, but we do remember the story about a little girl, all skin and bones.
So, what have stories got to do with economics, especially when economics is more about impersonal concepts than about particular people? More than many economists want to admit.
Just as stories are our way of making meaning out of the seeming chaos of life, so the economists’ “models” – whether the ones they carry in their heads or the sets of equations they program into a computer – aren’t as scientific as economists like to think.
Models are an economist’s way of making sense of the seeming chaos of the economy, which makes them just another (less entertaining) form of story. As their name implies, models aren’t the economy, they’re just models of the economy, which don’t reproduce all the complexity of the actual economy.
Modellers select just a few of the economy’s moving parts – the ones they believe do most to drive the economy – and ignore the many hundreds of parts that usually don’t play a big part in moving the economy along.
Models that don’t simplify the story of how the economy works are of no use to anyone because they don’t reduce the seeming chaos.
All of which is true of the stories we tell each other of what motivates people to behave the way they do in particular circumstances, and of what are the main things that matter in our efforts to get rich or have a successful marriage or live a satisfying life. Like models, our stories cut to the chase.
Nobel laureate Robert Shiller, a pioneering behavioural economist, was among the first to explain “how stories go viral and drive major economic events” in his book, Narrative Economics.
He shows how simple economic stories, when widely believed, can shape economic policy decisions, as politicians and their advisers face pressure to act according to the public narrative.
Whether the results are good or bad depends on whether the narrative is true. His insights are particularly relevant to explaining financial crises, housing cycles and sharemarket bubbles.
If you haven’t decided what you think about globalisation and the latest push to roll it back, a good book to read is Six Faces of Globalisation, by Anthea Roberts, of the Australian National University, and Nicolas Lamp, of Queen’s University in Ontario.
One review says it’s not just a book about globalisation, but also “the power and importance of narrative: how it is constructed and how it can contribute to a far more nuanced and complex understanding of the forces of change”.
What the authors did is take all the conflicting arguments for and against globalisation and boil them down to six contesting “narratives”. Why? To make it easier for us to understand the debate and the differing perspectives.