In his 2017 Presidential address to the annual meeting of the American Economic Association, Robert Shiller drew attention to the importance of narratives in driving movements in the macroeconomy. He defined a narrative as a “simple story or easily expressed explanation of events” which need not be entirely true, but rather could constitute a mix “of fact and emotion and human interest and other extraneous detail that form an impression on the human mind.”
Shiller argued that narratives had been ignored by research in economics, and that taking them into account could illuminate major economic events such as the Great Depression and the 2008 global financial crisis.
Other disciplines assign a more central role to narratives. Shiller found that the word “narrative” appeared in highest frequency in articles published in the field of history – though of course not every “historical narrative” is related to people’s stories or accounts of contemporary events, and historians are often skeptical of attempts to explain the past by relying on people’s belief systems as expressed, among other ways, in their stories. Economics ignored narratives just as it for a long time ignored identity, culture, social context and other such “soft” concepts that are difficult to quantify. Historical political economy has a better record of not shying away from soft concepts. With an appreciation for “stories” and a comparative advantage in systematically dealing with hard to measure quantities (like any quantity in the past), it is well positioned to study narratives and contribute to our understanding of their role in shaping human behavior, past and present.
Why are narratives important
Bénabou, Falk and Tirole (2018) identify two ways in which “stories people tell” matter. First, narratives reveal how people make sense of reality, how they organize information, which facts they consider important and which they ignore and how they connect facts to each other to form a coherent picture of the world around them. In the terminology of Hoff and Stiglitz, narratives capture “equilibrium fictions”, cognitive frames which constrain the way people process the infinite amount of data available to them.
Second, narratives are central in moral reasoning, as they provide a rationale for justifying some behaviors and deeming others as inappropriate. Bénabou, Falk and Tirole focus specifically on this role of narratives, for instance as excuses that allow individuals to behave in a self-serving way while also maintaining a positive self-image.
Both these functions of narratives are important for illuminating the past and drawing more general conclusions about human behavior. Understanding what cognitive frames (“fictions” or “ideologies”) people use to make sense of the world is essential to producing theories of how societies function and evolve. Racial ideology, discussed in Hoff and Stiglitz, can be used to illustrate this point. The same material conditions may have different effects on behavior depending on the salient group categories that structure the material world. A society in which people think in terms of Black and White, and where the cognitive frame of reference places White as superior to Black, works differently than a society with different categories and hierarchies. One example is scapegoating in response to economic adversity. As Hoff and Stiglitz note, “Before an individual can decide which group to hate, … he needs a frame that tells him what the groups are.” Negative economic shocks then have different effects depending on the frame of reference. Historically, outgroup hate has been expressed in narratives about violent Black men in the United States and narratives about subversive Jews in Europe.
The moral function of narratives is equally important. It is intricately tied to the function of sense-making, but with a self-serving component, whereby narratives can be used to justify antisocial behavior. In his study of the Indian Removal Act of 1830, legal scholar Robert Keeton examines how biblical narratives were used to legitimize the forced resettlement of Native Americans to the west of the Mississippi river. What stands out is the flexible and fluid way in which settlers used stories from the Old Testament to justify and further their goals. On the one hand they relied on the story of Esau and Jacob – the former losing his birthright and having to serve his younger brother – as a parable for the superiority of the white European agricultural lifestyle over the nomadic lifestyle of Native Americans. On the other hand, as in the opening example of Keeton’s article, they cast Native Americans as “sons of Ishmael” who were faced with an opportunity to move to their own “promised land.” Different narratives, appealing to different target audiences, emotions and interests, helped promote the same self-serving goal.
The moral resonance of narratives can perhaps help explain why acts of mass harm like Indian Removal, the Holocaust or Jim Crow became possible.
Empirically, the increasing availability of textual data and of methods to analyze them makes the study of narratives a promising avenue of research for quantitative researchers. Pitfalls are many – sources have selectively survived, and sometimes the problem of selection may be so severe as to rule out answering some kinds of questions. But work like Michalopoulos and Meng Xue’s Folklore and Robert Braun’s Kinderschreck project shows we can learn a great deal from stories and their content. There are many ways to do so.
Shiller argued that narratives have a causal effect on economic behavior, and this may be one lense through which to study them. Narratives, like ideas, may follow a process of random mutation. A “successful” narrative, one that resonates with many people, may spread in the population and change patterns of behavior and social equilibria. Narratives are also sometimes intentionally disseminated by “narrative entrepreneurs” (as in Bénabou, Falk and Tirole) looking to further their objectives. Propaganda is an example of an intentionally disseminated narrative. Pavi’s recent post shows that it is possible to study its causal effects and that those effects can be substantive.
Another way to study narratives is as an outcome variable. Narratives not only structure and constrain decision-making but are also endogenous to it. Acharya, Blackwell and Sen (2018) show how racist narratives were adopted post-emancipation to justify the subjugation of African Americans in Southern counties that depended on them for labor. A narrative that endogenously arises out of “fundamentals” forms part of a cognitive and socioeconomic equilibrium and helps sustain it.
Perhaps most interestingly, instead of studying narratives as either an independent or a dependent variable, one can study how narratives contribute to social, political and economic stability and change. In a new framework of culture, Acemoglu and Robinson argue that different “cultural configurations” – combinations of cultural components like social hierarchy, gender relations, religion and other fundamental attributes of a society – can have different effects on social and economic outcomes. Societies can move, with various degrees of difficulty, from one configuration to another by recombining elements of the cultural set – for instance, the same central component of Confucian thought, “the Way”, can be interpreted as either a top-down or a bottom-up philosophy of governance, giving rise to very different political systems. “Cultural entrepreneurs” (like narrative entrepreneurs in the Bénabou, Falk and Tirole framework) can creatively recombine ideas, concepts, elements of a culture in ways that resonate with members of society and thus induce shifts to new social and political equilibria. Studying how this happens – perhaps by asking which core elements of narratives make them resonant and quick to spread – can teach us much about social stability and change.
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