Irrational Exuberance, Along With Money, Status, and Sex

Nobel Laureate Robert Shiller explores the practical benefits of storytelling.

Posted May 16, 2018

Wikimedia Commons
Source: Wikimedia Commons

When I changed my major from psychology to literature, it was taken for granted that I had removed myself from the mainstream of human activity. English professors were seen to have a cloistered life indulging in great works of art, but nobody granted their study any practical utility.

Even my graduate advisor blanched at my contention that literature could have application in the real world. My request to bring the insights of the social sciences to bear on the question of how literature affected the mind was rejected because “we just don’t do that here.”

But I had found that a work of literature not only could elucidate the human condition better than the behavioral science courses I had been taking, but it fundamentally changed how I looked at things in the process.

Now in a recent article, Robert Shiller, Nobel Laureate and one of the seminal thinkers in behavioral economics, calls for incorporating “narratives” into the study of economic and political behavior. From the Civil War to the Great Depression, he illustrates how the quantitative data didn’t predict the event, but the prevailing narrative did.

He believes that economists missed the stories because narrative hasn’t been traditionally in their “toolkit,” and by the time they’re done doing equations and teaching equilibrium theory, they’re “tired.”

With recent discoveries in neuroscience, we know that narratives are actually the way the mind works. It’s not math that trained statisticians use to make decisions, but heuristics driven by the narrative they’re telling themselves, according to Amos Tversky, another legendary figure in behavioral economics.

Even Professor Shiller doesn’t escape the bias against the practical application of narratives by referring to those conversant with how stories work as “literary theorists.” But the scientific study of how narratives work started with Aristotle and has been going strong for almost two and a half millennia.

More significantly, though, Shiller doesn’t move from narrative as explanation to the active shaping of a narrative for guiding behavior and decision-making. Even Don Draper of “Mad Men” knew that “it all begins with a story,” and advertisers have learned that lesson well.

But so have great leaders throughout history. From Henry V to Martin Luther King, aspirational stories have engaged and energized followers. In fact, all successful transformational social movements have had an accompanying narrative.

The narrative is our user interface, determining what we perceive and how we think and act as a result. Being aware of the role of the narrative enables us to critically evaluate those we are exposed to, but also to create narratives that will drive the kind of behavior we want.

Those of us that took a vow of poverty when choosing to study the humanities are now beginning to reap the benefits. While it’s true that our starting salaries right out of college lag those in technical fields, humanities majors earn substantially more, later in their careers. Even better, a study of the Agta, a modern-day hunter-gatherer tribe found that storytellers have both more status and reproductive opportunities.

If more money, status, and sex aren’t practical benefits of storytelling, I don’t know what is.