Robert Shiller: we could talk ourselves into a crisis

Robert Shiller, the Yale economics professor and winner of the Nobel Memorial prize, believes "stories" can affect economics.

Robert J Shiller © Pedro PARDO/AFP/Getty Images

(Image credit: Robert J Shiller © Pedro PARDO/AFP/Getty Images)

Now, in his latest book, Narrative Economics, he argues that economists must stop focusing purely on economic data, and pay more attention to another "important driver of economic change, which is narrative." Stories affect behaviour, which in turn affects economic outcomes. For example, Shiller argues that a respect for frugality actually worsened the Depression. "It wasn't proper to live high and show off, you had to be more modest, which is a narrative that encourages curtailment of expenditure."

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