Evidence on Causation from Constellations of Narratives
In studying narratives from archival data, we may miss the constellation of
narratives behind any single aspect of cultural change because we may be able to
view only some of the superficial narratives. From our vantage point many
decades later, it is like standing on the earth on a partly cloudy night and trying
to discern the constellations in the sky above. We certainly will not see some of
the stars. In addition, narratives typically come and go over a period of years, but
economic fluctuations are often sudden, as in a financial panic that unfolds over
a matter of days. But the seeds of that panic may well have been planted over
months or years.
Ultimately, the mass of people whose consumption and investment decisions
cause economic fluctuations are not very well informed. Most of them do not
view or read the news carefully, and they rarely get the facts in any discernible
order. And yet their decisions drive aggregate economic activity. It must be the
case, then, that attention-getting narratives drive those decisions, often with an
assist from celebrities or trusted figures.
Once we recognize that newly mutated stories within narrative constellations
can cause current economic events, we have made substantial progress. But it is
not easy to achieve a secure understanding of how narratives affect the economy.
We need to step back first and consider some basic principles, some alluded to in
previous chapters, to guide our thinking, which brings us to the next chapter.

Chapter 8
Seven Propositions of Narrative
Economics
So far, we’ve seen that popular narratives gone viral have economic
consequences. Ultimately, we want economists to model this relationship to help
anticipate economic events. First, though, we want to offer some basic
propositions about economic narratives that we can use to understand
historically important narratives and to identify new narratives as they develop.
Before we begin, let’s review a few key features of economic narratives. As
the Bitcoin narrative illustrates, an economic narrative reminds people of facts
they might have forgotten, offers an explanation about how things work in the
economy, and affects how people think about the justification or purpose of
economic actions. The narrative may imply something about the way the world
works—in the Bitcoin narrative, the notion that computers are taking over, that
we are entering a new cosmopolitan era freed from the perennial problems of
local government incompetence and corruption—and how we can use that
information to our advantage. Or the narrative may suggest that performing a
specific economic action is a useful learning experience that will yield possible
benefits in the future. Sometimes, performing the economic action is a way of
involving ourselves in the narrative itself. By taking part in the narrative, we can
say that we are a part of history. For example, by purchasing Bitcoin, we joined
the international capitalist elite.

Proposition 1: Epidemics Can Be Fast or Slow, Big or Small
Economic narrative epidemics come in many different sizes and time frames.
There is no standard course for a narrative epidemic, and rapid growth of a fast
epidemic does not mean it will have long-run significance. In the appendix to
this book we review models from medical epidemiology that show that
contagion and recovery parameters can be chosen for the models that imply fast
big epidemics, fast small epidemics, slow big epidemics, and slow small
epidemics.
Because a narrative can come and go over many decades, it may last longer
than any data series on which economists rely to measure the narrative’s impact.
We must therefore not rush to judgment on the impact of a narrative. For
example, if we assume that a viral economic narrative is exactly like a meme
that goes viral on Facebook or Twitter over a period of days, then we will miss
the possibility that a historic long boom is the result of an epidemic that has
occurred over a much longer time frame.
Another example: if we do not appreciate that some epidemics are fast and
some are slow, we are likely to overrely on best seller status to judge a work’s
importance. Best seller lists tend to reflect sales over short intervals of time. The
New York Times list of best-selling books, for example, reports on the books that
sold the most copies in just the current week. (From earlier chapters, we
understand why the news media emphasize a short time interval: they have to
keep coming up with news stories.) The short time frame explains why the Bible
and the Koran are never on the best seller lists. If we look at the New York Times
best seller lists from decades past, hardly any of the books will be familiar. Most
were flash-in-the-pan short-term epidemics.
The contagion rate also varies greatly from one narrative epidemic to another.
One example of a narrative epidemic with very high contagion might be that of a
national emergency, like the start of a war. With such narratives, people feel that
the story is so important that they have license to interrupt any other
conversation with the news, or to speak with people with whom they do not
normally communicate. An example of a successful narrative with a very low
contagion rate might be a patriotic story illustrating a country’s national
greatness, a story that is brought up only at appropriate times at home, in the
classroom, or at events sponsored by civic organizations. Such a narrative can