Narrative Economics – How Idea Viruses Spread
“What is the most resilient parasite? Bacteria? A virus? An intestinal worm? An idea. Resilient… highly contagious. Once an idea has taken hold of the brain it’s almost impossible to eradicate. An idea that is fully formed – fully understood – that sticks; right in there somewhere..”Inception – Cobb
Inception is probably one of my favorite movies. Not only is the cast fantastic but the storyline is well developed and engaging.
The movie deals with one central idea – planting ideas deep into your unconscious.
When I first started reading Narrative Economics I couldn’t get Inception out of my head.
The theme of both the book/movie are very similar, namely – ideas infecting the mind. While Inception deals with one mind being affected, Narrative Economics uses the viral analogy to make broad observations about how society structures its beliefs and actions.
Setting the Background
In a lot of ways we are now living in a super optimized petri dish for viral idea proliferation.
We are all connected via smart devices and social media. We exist in a time of infinite leverage and massive limbic activation. A viral image/video can spread around the world instantaneously inciting emotions faster than ever before.
This is the golden care of viral ideas (at least compared to human history thus far).
In Robert Shiller’s book he discusses how these ideas permeate society and form the very fabric of our decisions and understanding. He illustrates how we are biologically susceptible for idea viruses.
But first… we need to get some background in basic epidemiological concepts to have a better initial framework for this book.
Introducing the SIR model.
This provides a basic framework for understanding how idea pathogens spread and how they follow the same fundamental behaviour as “real life” viruses.
They are broken down into 3 distinct measurements.
|S = S(t)||is the number of susceptible individuals,|
|I = I(t)||is the number of infected individuals, and|
|R = R(t)||is the number of recovered individuals.|
For simplicity sake, let’s use the following graph to show how these pathogens affect a given population.
As ideas move through a society there is a given population that is susceptible to a specific narrative. These people may also include groups of people with existing narratives that mesh well with a viral narrative.
This could be exemplified as those who have a particular world view and quickly adopt information that support their theories.
Confirmation bias anyone?
Conspiracy theorists are a great example – they are quick to jump on anything that supports an idea.
Forget R0, We’re Talking Exponential Growth 💥
It’s also important to consider the medium in which ideas spread. Ideas are MUCH more viral than actual viruses which rely on R0, pronounced “R naught,” is a mathematical term that indicates how contagious an infectious disease is. It’s also referred to as the reproduction number.
Virus require physical contact and close proximity to spread. Idea viruses spread seamlessly through any communication medium – social media, news, image, video or audio.
Infection rates of an idea virus are many orders of magnitude more contagious than physical pathogens.
Add in memes and other visual manifestations of a narrative and you have a recipe for global idea virus colonization.
Alright now that we covered the basics, let’s get into a few more important distinctions and then the book notes.
Important Considerations When Considering Idea Viruses
Ideas have genetic material. Think of this as the story’s DNA. This DNA can be mixed through a process of adaptive selection and evolution. The result may be an idea that can go through many iterations and create better contagion rates. This can be done purposely or naturally.
Certain ideas may lay dormant for periods of time and reemerge under a different name. An Influenza like virus may adapt and become another variant.
Social media has allowed nodes on the global trust network to become more interconnected. A new story that was shared nationwide may not have much of a trust factor but shared via someone on your “network” makes it more trustworthy. Combined with confirmation bias and you have a recipe for instant transmission.
Global Transmission Increases Evolutionary Adaptation
Previously idea viruses were contained locally with slower levels of transmission. The Internet has made idea viruses more adaptive, more resilient and better suited for long term survival.
Lowered Immune Defense
Information overload, biased fact processing and lack of open discussion about various ideas have created a global population that lacks the requisite abilities to evaluate the veracity of new ideas. This can be seen as an immune response to potentially harmful ideas or trends.
- Narrative economics, the study of the viral spread of popular narratives that affect economic behavior, can improve our ability to anticipate and prepare for economic events. It can also help us structure economic institutions and policy.
- The overriding theme is that most people have little or nothing to say if you ask them to explain their objectives or philosophy of life, but they brighten at the opportunity to tell personal stories, which then reveal their values. Emotional Reasoning > Facts
- Structuralists believe that the mechanisms which organize units and rules into meaningful systems come from the human mind itself.
- Contagious narratives often function as metaphors. That is, they suggest some idea, mechanism, or purpose not even mentioned in the story, and the story becomes in effect a name for it. The human brain tends to organize around metaphors.
- Neuroscientist Oshin Vartanian (2012) notes that analogy and metaphor “reliably activate” consistent brain regions in fMRI images of the human brain. That is, the human brain seems wired to respond to stories that lead to thinking in analogies.
- The apparent randomness in outcomes has to do with randomness in the mutation of stories to more contagious forms. Stories mutate to become more adaptive.
- Fear is well known as a cement of societies.
- I want to argue here not only that causality exists, but also that it goes both ways: new contagious narratives cause economic events, and economic events cause changed narratives. This can create a self fulfilling prophecy.
- We should not base our conclusions on the assumption that the most economically important narratives are those that are constantly talked about. Very significant epidemics may generate very little talk. Depends who is hearing it.
- Ultimately, a story’s contagion rate is unaffected by its underlying truth. A contagious story is one that quickly grabs the attention of and makes an impression on another person. Infection rate > truth
- The timing is unpredictable; unlike the hypothesized business “cycles,” narratives don’t recur at regular time intervals.
- Exponential Growth – > In the past, ideas spread in a random, non-systematic way. Social media platforms make it possible for like-minded people with extremist views to find each other and further reinforce their unusual beliefs.
Defining Narratives 💭
- I focus on two elements: (1) the word-of-mouth contagion of ideas in the form of stories and (2) the efforts that people make to generate new contagious stories or to make stories more contagious. First and foremost, I want to examine how narrative
- A story may also be a song, joke, theory, explanation, or plan that has emotional resonance and that can easily be conveyed in casual conversation.
Contagion 101 🦠
- Contagion is strongest when people feel a personal tie to an individual in or at the root of the story, whether a stock personality type or a real celebrity.
- Economic narratives follow the same pattern as the spread of disease: a rising number of infected people who spread the narrative for a while, followed by a period of forgetting and falling interest in talking about the narrative
- These models divide the population into compartments: susceptible to the disease (S), infected and spreading the disease (I), and recovered or dead ®
- When an identified personality is associated with a narrative, a face we can picture in our minds, then our brains involve our models of people, voices, and faces with the story, lowering the likely rate of forgetting.
- Disease epidemiology has shown us that there will likely be repeats of variants of older epidemics in the future as reservoirs of old epidemics mutate or react to a changed environment to start a new wave of contagion.
- Their simplest model divided the population into three compartments: susceptible, infective, and recovered. It is therefore called an SIR model or compartmental model. S is the percentage of the population who are susceptible, people who have not had the disease and are vulnerable to getting it. I is the percentage of the population who have caught the disease and are infective, who are actively spreading it. R is the percentage of the population who are recovered,
Understanding Narratives ✅
- The “story” of our times, and of our personal lives, is constantly changing, thereby changing how we behave.
- We must pay attention to the names that people attach to their narratives. Seemingly minor changes in the name of a narrative can matter a lot, especially if the new name attaches to a different constellation of narratives. Same story, different name.
We All Love Stories 🔑
- Another example: anthropologist William M. O’Barr and economist John M. Conley interviewed investment managers about their business and found a widespread tendency for employees at the firm to tell a story about the founding of their firm and about its values. The story has some common features across firms, and it is akin to the creation myths that, as anthropologists have noted, primitive tribes tell about their own origin. The story tends to center on one man (rarely a woman) who showed exceptional foresight or courage in founding the tribe—or, in this case, the firm.
- Some literary theorists, inspired in part by psychoanalysis, the archetypes of Carl Jung and the phantasies of Melanie Klein have found that certain basic story structures are repeated constantly, though the names and circumstances change from story to story, suggesting that the human brain may have built-in receptors for certain stories.
- According to Ronald B. Tobias (1999), in all of fiction there are only twenty master plots: “quest, adventure, pursuit, rescue, escape, revenge, the riddle, rivalry, underdog, temptation, metamorphosis, transformation, maturation, love, forbidden love, sacrifice, discovery.
Narrative Constellations ✨
- Just as the world experiences co-epidemics of diseases, where two or more diseases interact positively with each other, we also see co-epidemics of narratives in which the narratives are perceived as sharing a common theme, such as case studies that illuminate a political argument, creating a picture in the mind that is hard to see if one focuses on just one of the narratives. In other words, large-scale economic narratives are often composed of a constellation of many smaller narratives.
- In addition to a constellation of narratives, there is a confluence of narratives that may help drive economic events. By a confluence, I mean a group of narratives that are not viewed as particularly associated with one another but that have similar economic effects at a point in time and so may explain an exceptionally large economic event.
- Idea viruses don’t start big – epidemic first became visible more than a decade after the model was introduced, a phenomenon that we also see in the medical-epidemic framework, where epidemics may go unobserved for a while after very small beginnings.
- We can say with some accuracy that most people put on a show of their own knowledgeability and try to conceal their ignorance of millions of facts. Hence narratives that seem contrary to prevailing thought may have lower contagion rates that do not result in epidemics.
- A high contagion parameter and a low recovery rate mean that almost the whole population eventually hears the narrative, sometimes very quickly.
Importance of Narrative First Understanding 🔑
- Traditional economic approaches fail to examine the role of public beliefs in major economic events—that is, narrative.
- Some of the most famous economic forecasts in world history appear to be based substantially on observations of narratives and worries about their human consequences.
- The array of stories circulating at any point of time conveys all of these dimensions.
- It is a narrative that is well crafted for contagion, effectively capturing the anarchist spirit; and, of course, that is why most of us have heard of it. It is part bubble story, part mystery story. It allows nonexperts and everyday people to participate in the narrative, allowing them to feel involved with and even build their identity around Bitcoin.
- The history of quarantines extends back at least to 1377 when the city of Venice imposed during a plague a thirty-day isolation period on arrivals by sea, and then a forty-day isolation period for travelers by land (the word quarantine derives from the Latin word for forty).
- Uncle Tom, Simon Legree, and Eliza narratives played an unmistakable role in the North’s decision to invade the South after it seceded.
- In the heart of the 2007–9 recession, the Great Depression narrative may have intertwined with bank run narratives to create this popular perception: “We have passed through a euphoric, speculative, immoral period like the Roaring Twenties. The stock market and banks are collapsing now as they did in 1929, and the entire economy might collapse again, as it did in the 1930s. We might all lose our jobs and crowd around failed banks in a desperate attempt to get our money.”
- Buying a home narrative – > American Dream turned into owning a home, with the underlying sense that owning a home implies patriotism and commitment to the community.
Making Things Lindy 🧮
- Over this gestational interval, other scholars in the discipline increasingly appreciate the model, and the epidemic spreads through academic rituals, such as paper presentations at seminars and major conferences. Eventually the models make their way into textbooks.
- A key proposition of this book is that economic fluctuations are substantially driven by contagion of oversimplified and easily transmitted variants of economic narratives. Oversimplification = nicely packaged idea virus
- Viral narrative and a nonviral narrative may depend on some aspect of the narrative that is not related to our enthusiasm for the narrative. It may depend, for example, on something hard to observe directly, such as the ability to connect with other topics of conversation, or reminders in other narratives.
- Research looked at 126,000 rumors spread by three million people, and they found that false stories had six times the retweeting rate on Twitter as true stories.
Dying for a Good Story 🤤
- The human tendency to form simple narratives around even the most complex chains of events infects even the most analytical minds. Garry Kasparov, international chess grandmaster, commented from his own experience: The biggest problem was that even the players would fall into the trap of seeing each game of chess as a story, a coherent narrative with a beginning and a middle and a finish, with a few twists and turns along the way. And, of course, a moral at the end of the story
- 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.
Brains and Narratives 🧠
- 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.
- With no logical answer or solution—for example, in the decision whether to make a risky investment—the human mind may delegate the decision to some brain circuitry. Basically we outsource to the rat brain.
- In journalism, Marcel Machill and his coauthors, noting evidence that viewers of television news retain little of the news they hear, presented an actual TV news report on the dangers of air pollution to a control group. They also presented a variation of the report to the experimental group in the form of a story with a protagonist, a baker with health problems caused by air pollution, in an unfair struggle against antagonists who benefited from the polluting activities. The experimental presentation of the news was retained better
- Fake news often makes an impression on people because the brain processes that implement reality monitoring are imperfect. According to psychologists and neuroscientists, source monitoring is a difficult process for the brain, which judges sources by their linkages to other memories.21 Thus, over time, the brain may forget that it once deemed stories unreliable. Also, adeptness in source monitoring differs across individuals, and temporal diencephalic and frontal lobe damage in the brain may contribute to extreme defects in source monitoring
- We don’t’ change much – > However, the events and reactions of 50, 100, and 150 years ago are surprisingly similar to what we see and experience today.
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