How Stories Drive the Stock Market

I came across this article today in The New York Times written by Robert Shiller.  Shiller is a Sterling Professor at Yale University who studies macroeconomics, behavioral economics, and public attitudes regarding markets, so he’s very qualified to discuss the role of stories in our economy.

The general gist of the article, as I understand it, is that stock markets are driven as much by feelings and stories than they are by data and rationality.  It underscores the need to critically inspect information that you’re given– it may be rooted in truth, but it could easily be influenced by emotion.  It also underscores why economic predictions can be so difficult to get right, and why economics is a social science; our assumptions are rooted in the belief that people are rational actors who carefully make the best decisions possible, even though people are famously irrational.  If we’re driven by stories and emotions, it’s much harder to predict people’s actions and reactions.


Listing image by Sam valadi, and used under the Creative Commons Attribution 2.0 license.

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