Robert Shiller05 October 2019

Robert Shiller Discusses Narrative Economics

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Narrative Feedback Loop

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Insights & moments

The myth-busts, hot takes, explainers, and tools worth keeping.

Myth Buster· 1

Myth Buster18:55

Why Truth Alone May Not Kill a False Story

People often retain the content of a story while forgetting whether its source was reliable. Corrections also struggle when they are less entertaining or contagious than the original account, allowing misinformation to circulate without deliberate deception.

Memory preserves stories more reliably than source credibility.
Casual repetition can spread falsehoods without malicious intent.
A correction must compete for attention, not merely establish accuracy.
Cognitive dissonance can make people unreceptive to corrections.

“you remember stories that you heard in the past as a story, and you don't always have well tied to that story in the linkages…”
Robert Shiller · 19:10

“The problem with theories are narratives that counter a false narrative is that they might not be contagious.”
Robert Shiller · 20:23

#misinformation#memory#fake news#psychology

Hot Take· 1

Hot Take42:28

Automation Fear Can Hurt Workers Before Automation Does

Fear that machines will eliminate jobs has repeatedly resurfaced since the Luddites, changing its technological form over time. Shiller notes that such fears can suppress spending, while also acknowledging that modern technology may genuinely reduce the marginal value of some human work.

The automation narrative has persisted for roughly two centuries.
Its objects mutate from factory machinery to robots and AI.
Fear of future displacement can cause precautionary saving.
Current inequality suggests the underlying risk cannot be dismissed.
Society may need to invent roles that continue to value people.

“That was something a lot of people believed and discourage them from spending because they thought, I better start saving for this feature that's coming.”
Robert Shiller · 43:49

“It's partly because the problem is whether we can invent new roles for ourselves that would value people, uh as opposed to robots.”
Robert Shiller · 46:20

#automation#artificial intelligence#employment#inequality

Explainer· 4

Explainer12:43

Why the Laffer Curve's Napkin Story Endured

The Laffer Curve gained cultural force through a compact origin story: an economist sketches a simple diagram on a restaurant napkin. The visual setting and punchline made an otherwise technical tax argument feel intuitive, spontaneous, and memorable.

A vivid origin story can popularize an abstract theory.
The napkin was irrelevant to the theory but central to its retelling.
A quickly explained diagram supplied a memorable punchline.
Narrative appeal can outlast disappointing policy applications.

“Everyone remembers this napkin. I wonder that's just an irrelevant detail.”
Robert Shiller · 14:20

“that diagram is the punchline”
Robert Shiller · 14:49

#tax policy#laffer curve#visual storytelling#economics

Explainer25:57

Why Interest Rates Can Dip Below Zero—but Not Too Far

Negative rates do not completely violate economic logic because securely holding large quantities of cash has costs. Those storage and security frictions permit slightly negative yields, while the option to hold cash still creates a practical lower limit.

Cash storage is costly at institutional scale.
Small negative rates can reflect those practical costs.
Deeply negative rates would encourage substitution into physical cash.
Gold storage under a gold standard created an analogous carrying cost.

“It can't get down to minus five percent. It can't because you would hold cash instead.”
Robert Shiller · 26:30

“you have to pay for storage and security for gold bars.”
Barry Ritholtz · 27:25

#interest rates#cash#monetary policy#gold

Explainer32:14

Why Conspiracy Stories Feel Empowering

Shiller argues that genuine historical conspiracies make some vigilance rational, but certain personalities become disproportionately attracted to conspiratorial explanations. Monetary institutions are especially fertile subjects because money is mysterious, powerful, and controlled by distant authorities.

Real conspiracies make blanket dismissal unreasonable.
Belief in one conspiracy often correlates with belief in others.
Secret knowledge can make a person feel more important or powerful.
Money and central banking supply mystery, resentment, and hidden actors.

“there are conspiracies in his We know that there are conspiracy so a rational person has to be alert to possible can spiracies.”
Robert Shiller · 32:51

“It makes you feel bigger and more important if you discover a a conspiracy”
Robert Shiller · 35:19

#conspiracies#central banks#psychology#money

Explainer46:47

How Labels Like “Great Depression” Rewrite Economic Memory

Names for downturns emerge and compete over time rather than appearing automatically with the events. Once a label becomes dominant, its associations influence which historical episodes people remember and how they interpret new crises.

The Great Depression was often called “hard times” during the event.
The phrase became more culturally prominent after World War II.
“Great Recession” had been applied to earlier downturns before 2008.
Words such as recession and depression carry different associations.
Popular usage can defeat attempts to preserve an older label.

“They didn't call it the Great Depression. In the Great Depression? What then? Uh they they would call it hard times”
Robert Shiller · 47:11

“the language changes means something because different words have different connotations on associations in our mind.”
Robert Shiller · 51:29

#great depression#recessions#language#economic history

Story· 2

Story05:34

When Falling Home Prices Became Unthinkable

Shiller recalls asking a businessman during the housing boom what would happen if home prices declined. The man was not defending a carefully reasoned forecast; the possibility of a major fall was simply absent from the prevailing conversation.

The housing narrative discouraged consideration of downside risk.
Recent historical declines received less attention than the dominant boom story.
People can ignore a scenario without explicitly claiming it is impossible.
Narrative absence can matter as much as narrative belief.

“It's that they didn't pay any attention to the thought that they might go down.”
Robert Shiller · 06:10

“He couldn't even conceive of the idea that prices might fall.”
Robert Shiller · 06:48

#housing#financial crisis#risk#bubbles

Story55:30

How Blue Jeans Became a Symbol of Authenticity

Blue jeans moved from practical workwear to a durable symbol of being unpretentious and real. Politicians, dude ranches, distressed fashion, and James Dean successively added meanings that transformed the garment without changing its basic function.

Blue jeans began as clothing for workers, farmers, and ranchers.
“Blue Jeans Bill” used them to signal an unpretentious identity.
Dude ranches connected jeans with aspirational cowboy experiences.
Artificial wear heightened the appearance of authenticity.
James Dean added rebellion and cultural glamour.

“It's Uh, I'm I'm real, I'm not the fake.”
Robert Shiller · 56:20

“The Rebel without a Car James Dean, where he fashionably wore blue jeans for the whole movie”
Robert Shiller · 57:00

#fashion#identity#blue jeans#james dean

Q&A· 1

Q&A22:47

What Shiller and Fama Actually Disagree About

Shiller describes his Nobel-week discussions with Eugene Fama as less factually divided than their public reputations suggest. Both recognize that markets are difficult to beat, but they frame changing prices through different explanatory narratives.

Fama and Shiller agreed on many empirical facts.
Shiller emphasizes people being swayed by narratives.
Fama interprets variation through tastes or changing risk aversion.
Neither claims that major market turning points are easy to time.

“it turns out that we didn't really disagree much U much that was factual.”
Robert Shiller · 23:41

“It's hard to pin down when the turning point is going to come.”
Robert Shiller · 25:36

#market efficiency#eugene fama#bubbles#investing

Takeaway· 1

Takeaway1:09:36

A Failed Company Can Still Change Its Industry

Shiller's Macro Markets firm shut down, but part of its work survived in real-estate markets tied to the Case-Shiller index. He frames entrepreneurship as creative contribution rather than a binary test of whether a company makes its founders rich.

Macro Markets ceased to exist as a company.
Its work helped create a continuing real-estate market.
Commercial failure did not erase the venture's institutional legacy.
Creativity can remain rewarding without financial success.

“So I think what we did change the world, and even if it didn't make us rich.”
Robert Shiller · 1:10:17

“There's something about creativity that is rewarding even if the business doesn't succeed.”
Robert Shiller · 1:10:29

#entrepreneurship#failure#innovation#real estate