impulse to tell stories. For example, a team from Emily B. Falk’s neuroscience
lab at the Annenberg School at the University of Pennsylvania has used
functional magnetic resonance imaging to study the brains of people making
decisions whether to share health news stories. The team concluded that people
tended to share content that enhances self-related thoughts—that is, information
that “engages neural activity in regions related to such processes [self-
presentation or mental concept], especially in medial prefrontal cortex,” and that
“involves cognitions or forecasts about the mental states of others.”3 In other
words, these people are more willing to share their health information in the
form of stories about themselves and others.
Paul J. Zak, a neuroeconomist, has shown experimentally that narratives with
a “dramatic arc” increase levels of the hormones oxytocin and cortisol in the
listener’s bloodstream, as compared with more “flat” narratives.4 These
hormones in turn have well-documented effects on behavior. Oxytocin,
sometimes called the “love hormone,” plays a role in facilitating relationships.
Cortisol, sometimes called the “stress hormone,” has been shown to play a role
in regulating blood sugar, assisting memory formation, and reducing
inflammation.

Neurological Responses to Stories Evoking Fear
News media and popular discussions have long described financial crises as
panics created by a spate of sudden economic failures following a period of
excessive complacency about economic risks. It may seem like journalistic hype
to use charged words such as panic, which conjures images of a stampeding mob
trying to escape a sudden physical danger, and complacency, which suggests a
sort of smug stupor. Yet people mostly seem perfectly rational during such
financial events, which take place over months and years of largely normal
living, and they tend to present themselves as sorting through the facts. Even
during a financial “panic,” people seem mostly normal and relaxed, joking and
laughing.
But are panic and complacency really so far off the mark? Both words
describe mental states that must be supported through neurological structures.
We need to study those structures to determine whether there is any common
neurology between financial panics and other panics, between financial
complacency and other types of complacency.
Consider an example that is current during the writing of this book: the
pattern of increasing risk taking by banks as the tenth anniversary of the 2007–9
world financial crisis approached. In 2017, the Federal Deposit Insurance
Corporation issued a report expressing concern that US banks, in a reach for
yield, were taking excessive risks by extending the maturity of their investments.
For nearly ten years after the financial crisis, interest rates had been very low,
though higher at longer maturities. Reaching for these higher yields was risky
for banks, because if interest rates suddenly increased, they might have to pay
more to keep depositors than they earn from the longer-maturity investments,
which could cause the banks serious trouble. Ultimately, the banks decided to
take the risk, but how did they form their expectations of future interest rates?
No expert has a proven record of forecasting interest rates years into the
future. No one can tell a banker how long to wait out a period of low interest
rates or guarantee that the low rates will go on forever. All that bankers have are
fading memories of narratives of other historical periods when interest rates rose
dramatically, leading droves of depositors to run to their banks and withdraw
their money. Those stories seem less relevant when interest rates have been low
for ten years, but there is no way to quantify how much less relevant.