Saturday, February 11, 2017

Robert Shiller fleshes out Expectations with Narrative Economics. Meanwhile ...

Robert Shiller:
My goal in this paper is to describe what we know about narratives and the penchant of the human mind to be engaged by them, to consider reasons to expect that narratives might well be thought of as important, largely exogenous shocks to the aggregate economy.
But are narratives more important than this?

The Debt-per-Dollar Ratio, 1916-1970
And this?

The Debt-per-Dollar Ratio since 1970
And this?

Household Debt Service
And this?

Private-to-Public Debt Ratio
Click here for the Excel file
I think not.

1 comment:

The Arthurian said...

Twice today -- first Antonio Fatas and then Reddit I came upon Robert Shiller on "narratives" again"
Economics and the human instinct for storytelling
So I read the damn thing.

Okay. Shiller tells a good tale to explain the depression of 1920-21. Does he have the right explanation? I don't know; he might. However, as a rule, it must be conditions that lead to expectations -- and conditions that lead to narratives, even when the narratives are wrong. The present-day narrative about the Federal debt as the cause of our economic troubles is a perfect example of the latter.