NEW PARADIGM NARRATIVE ECONOMICS

According to Nobel Prize laureate in economics Robert Shiller, this is a new scientific field that studies the impact on economic processes of ideas (narratives) that “spread like viruses.” According to Shiller, the world is governed not by money, but by stories (narratives). For example, Bitcoin is worth thousands of dollars because people believe in it. Large companies, meanwhile, do not go bankrupt not only because of their financial indicators, but also because of the narratives formed about them.

Robert Shiller was the first to draw attention to this issue: the narratives underlying economic models (that is, widely spread ideas) can sometimes produce more accurate results than traditional models. According to this theory, by studying these narratives, which have taken the form of an “information epidemic” and are tied to people’s beliefs, it is possible to make more accurate economic forecasts. Such forecasts can prepare people for economic turmoil and help prevent potential losses.