contagion never entered their mathematical models of the economy. Such
contagion is the heart of narrative economics.
In today’s parlance, stories of fabulously successful investors who were not
experts in finance “went viral.” Like an epidemic, they spread from person to
person, through word of mouth, at dinner parties and other gatherings, with help
from telephone, radio, newspapers, and books. ProQuest News & Newspapers
(proquest. com), which allows online search of newspaper articles and
advertisements back to the 1700s, shows that the phrase go viral (and variations
going viral, went viral, and gone viral) first appeared as an epidemic in
newspapers only around 2009, typically in connection with stories about the
Internet. The associated term viral marketing goes back only a little further, to
1991, as the name of a small company in Nagpur, India. Today, as a ProQuest
search reveals, the phrase going viral itself has gone viral. Google Ngrams
(books.google. com/ngrams), which allows users to search for words and phrases
in books all the way back to the 1500s, shows a similar trajectory for go viral.
Since 2009, trending now, a synonym for going viral, has also gone viral. These
epidemics were helped along by the prominent statistics displayed on Internet
sites about numbers of views or likes. Both “going viral” and “trending now”
characterize the rising part of the infectives curve, when the epidemic is
growing. There isn’t as much popular attention to the process of forgetting, the
later falling part of the infectives curve, though for economic narratives that will
likely be as important a cause of changes in economic behavior.
Allen was thinking in terms of stories going viral when he wrote his book,
though he did not use the term. He wrote about his “emphasis upon the changing
state of the public mind and upon the sometimes trivial happenings with which it
was preoccupied,”2 but he did not formalize his thinking about the contagion of
narratives.
We need to incorporate the contagion of narratives into economic theory.
Otherwise, we remain blind to a very real, very palpable, very important
mechanism for economic change, as well as a crucial element for economic
forecasting. If we do not understand the epidemics of popular narratives, we do
not fully understand changes in the economy and in economic behavior. There is
an extensive medical literature on forecasting disease epidemics. This literature
shows that understanding the nature of epidemics and their relation to contagion
factors can help us forecast better than those using purely statistical methods
can.

Narrative Economics: What’s in a Phrase?
The phrase narrative economics has been used before, though rarely. R. H. Inglis
Palgrave’s Dictionary of Political Economy (1894) contains a brief mention of
narrative economics,3 but the term appears to refer to a research method that
presents one’s own narrative of historical events. I am concerned not with
presenting a new narrative but rather with studying other people’s narratives of
major economic events, the popular narratives that went viral. In using the term
narrative economics, I focus on two elements: (1) the word-of-mouth contagion
of ideas in the form of stories and (2) the efforts that people make to generate
new contagious stories or to make stories more contagious. First and foremost, I
want to examine how narrative contagion affects economic events.
The word narrative is often synonymous with story. But my use of the term
reflects a particular modern meaning given in the Oxford English Dictionary: “a
story or representation used to give an explanatory or justificatory account of a
society, period, etc.” Expanding on this definition, I would add that stories are
not limited to simple chronologies of human events. A story may also be a song,
joke, theory, explanation, or plan that has emotional resonance and that can
easily be conveyed in casual conversation. We can think of history as a
succession of rare big events in which a story goes viral, often (but not always)
with the help of an attractive celebrity (even a minor celebrity or fictional stock
figure) whose attachment to the narrative adds human interest.
For example, narratives from the second half of the twentieth century
describe free markets as “efficient” and therefore impervious to improvement by
government action. These narratives in turn led to a public reaction against
regulation. There are of course legitimate criticisms of regulation as practiced
then, but those criticisms were usually not powerfully viral. Viral narratives need
some personality and story. One such narrative involved movie star Ronald
Reagan, who became a household name as the witty and charming narrator of
the highly popular US television show General Electric Theater from 1953 to
1962. After 1962, he entered politics in support of free markets. Reagan was
elected president of the United States in 1980. In the 1984 reelection, he won
every state except his opponent’s home state. Reagan used his celebrity to launch
a massive free-markets revolution whose effects, some good and some ill, are
still with us today.