From an interview with Robert Shiller, author of the book Irrational Exuberance, from Kiplinger's Personal Finance:
Why do you say "stories" are so important in our economic thinking?
Social psychologists argue that the human brain is organized around stories. It's a memory device -- we tend to remember things that are tied to stories. The impact of stories on behavior is a major omission from economic theory. The main story line of the 1990s was the idea that capitalism was triumphant and people didn't want to be left out. The same thing happened with the housing market this decade. People were worried that they'd be left out, so their egos compelled them to take part in the housing boom.
That's probably why the Bible is filled with parables.
Yes, there aren't a whole lot of numbers in the New Testament.
The story of Capitalism's preeminence certainly has taken a beating.
Yes, but our attitude toward business changes from time to time. We hit low points in the 1970s, 1980s and 1990s, and today there's a sense big business was involved in a conspiracy. Anger about that will result in more regulation.
Do you see Americans adopting new values as a result of the turmoil?
It's hard to predict. But I'm hopeful that people will start valuing friendships more and material things less.
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