More on this book
Community
Kindle Notes & Highlights
as supply-side economics, which holds that governments can increase economic growth by decreasing regulation and lowering taxes.
Reagan quote of Economy.
1967, when Walter Trohan, a conservative commentator for the Chicago Tribune, wrote that: The federal government operates pretty much in line with the quip, “If it moves, tax it; if you can’t tax it, control it; if you can’t control it, give it a million dollars.”24
Quote. How does Government operate.
exclusively human: the propensity to make music and the propensity to tell stories as sequences of events, stories that trigger emotions.
Qualities which are exclusively human.
Oxytocin, sometimes called the “love hormone,” plays a role in facilitating relationships. Cortisol, sometimes called the “stress hormone,” has been shown to play a role in regulating blood sugar, assisting memory formation, and reducing inflammation.
Fear is a normal emotion for all mammals and higher animals, and it is supported by brain structures. The extinction of fear is a process that must take place over time to release the fear after the danger has passed.
Fear is normal.
amygdala (an almond-shaped area of the brain) play a fundamental role in both the fear-acquisition stage and the fear-extinction phase, increase their firing during fear acquisition, and reduce their firing during extinction of the fear. Not all of the neurons reduce their firing, keeping a residual fear intact.
Amygdala and fear.
Contagion was increased by communications at bazaars, religious festivals and fairs, as well as casual encounters.
In ancient Rome, for example, people who wanted the news would attend the regular salutatio at their patron’s home, or they went to the Forum where they listened to orators or a praeco, who wore a special toga to stand out. The praeco announced news and stories to the crowd, read advertisements, and handled auctions. Rumor is the ancient Latin word for contagious narrative.
How news was delivered in Rome.
melancholy
Charles Mackay drew attention to the contagious spread of “extraordinary popular delusions” in his 1841 book, Memoirs of Extraordinary Popular Delusions.
Book.
Gustave Le Bon said in his book Psychologie des foules (The Crowd, 1895), “Ideas, sentiments, emotions, and beliefs possess in crowds a contagious power as intense as that of microbes.”
Quote.
the difference between a viral narrative and a nonviral narrative may depend on some aspect of the narrative that is not related to our enthusiasm for the narrative.
In a competitive market in which competitors manipulate customers, and in which profit margins are competed away to normal levels, no one company can choose not to engage in similar manipulations.
Do you really have to do what the competition does?
“Phools,” as George Akerlof and I call them, who do not think about the marketing efforts, are apt to think that events exogenously give us the news by jumping out at us. But, in fact, the news media are choosing the news because their financial success depends on their stories’ viral impact.
News and Indian Phools.
recent example occurred in the United States in 2017 during a total eclipse of the sun that found many people traveling within the country to see the eclipse in its totality. The popular news media were relentless in covering the story, because, no doubt, they recognized its contagion as an experience shared by so many people. Some reporting took on a mystic-patriotic tone, as if God had granted this extremely rare event to the United States. Though the US media frequently used the phrase “once in a lifetime,” they did not mention that another total eclipse of the sun would occur again in the
...more
Example of Phools and news.
Those who do not reflect on the imperatives of marketing may imagine that people wear logo-branded clothing because they want to associate themselves with a prestigious clothing designer. But perhaps logo marketing works because it increases contagion. Customers may absently reach for the logo product because it is familiar and safe, and because so many others are wearing clothes with the same logo.
Marketing logo and contagion effect.
phools think that the popularity of a story or of a brand is evidence of its quality and deep importance, when in fact it rarely is.
Psychologists have noted that the human species is unique in the advanced development of its theory of mind—that is, humans’ strong tendency to form a model in their own minds of the activities in others’ minds. We are thinking about what others are thinking, about their individual thoughts. We observe their actions, their facial expressions, and their vocal intonation, which we then relate to their beliefs and intentions.
Concept - Theory of mind.
The stories that go viral are essentially random, just as mutations in evolutionary biology are random.
Narrative psychology also relates to the psychological concept of framing.25 If we can create an amusing story that will get retold, it can establish a point of view, a reference point, that will influence decisions. Framing is related to the Daniel Kahneman and Amos Tversky representativeness heuristic (1973),
Concept of framing.
George Katona, one of the founders of behavioral economics and author of the 1975 book Psychological Economics,
Trivia.
The key problem is determining what is a cause versus what is a consequence.
“cultural entrepreneur,”
Direction of Causality
It is not easy to prove direction of causality between a narrative and the economy. For example, did the stories of successful speculators and wild enthusiasm for stocks that characterized the 1920s cause increased stock prices and increased corporate earnings? Or did those increased earnings cause the enthusiasm? Was the similar enthusiasm for Bitcoin after 2009 in any way responsible for the increase in Bitcoin’s price? Or was Bitcoin’s increased value just a logical reaction to news stories and new progress in the mathematical theory of cryptography?
A problem in establishing direction of causality for major economic events is that economists usually cannot run controlled experiments that accurately simulate economic conditions at large.
Sociologist Robert K. Merton coined the phrase self-fulfilling prophecy in 1948,
Now, economists use the term sunspots to refer to any extraneous noise that affects the economy because people believe it will.
In the field of marketing, Jennifer Edson Escalas notes, self-referencing occurs when the viewer of an advertisement relates a product to his or her personal experiences.
Escalas found that the narrative transportation is more effective, especially when the analytical case for the product is weak.8
Results indicated that narrative messages were more effective than statistical messages.
Stories are one key building block.
Love Is a Story (1998),
Flashbulb memory is one aspect of the human tendency to become motivated by seemingly random details of stories, even brief stories that are little more than anecdotes.
if we were to ask people to recount such trivial details about another random day decades ago, they would have no memory at all,
precisely because the day was not connected with a famous or infamous event.
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.
In other words, at some level, many people enjoy believing the story and do not care about its factuality.
Sometimes, performing the economic action is a way of involving ourselves in the narrative itself. By taking part in the narrative, we can say that we are a part of history.
Economic narrative epidemics come in many different sizes and time frames. There is no standard course for a narrative epidemic, and rapid growth of a fast epidemic does not mean it will have long-run significance.
for the models that imply fast big epidemics, fast small epidemics, slow big epidemics, and slow small epidemics.
why the news media emphasize a short time interval: they have to keep coming up with news stories.)
banal:
the assassination of Archduke Franz Ferdinand, which triggered World War I,
the United Kingdom declared war on Germany on September 3, 1939, marking the beginning of World War II,
Truth Is Not Enough to Stop False Narratives
The WHO went on to report that only about 50% of patients in developed countries consistently follow doctor’s orders for chronic illnesses, and even fewer do so in emerging countries.
A contagious story is one that quickly grabs the attention of and makes an impression on another person, whether that story is true or not.
these authors interpreted their results as confirming that people are “more likely to share novel information.” In other words, contagion reflects the urge to titillate and surprise others.
