Considering the current pandemic, Shiller proposed a narrative on how its effects might influence the economy going forward, particularly in big cities. Because people have been less inclined to attend crowded social events typically hosted in metropolitan areas, prices may drop there and rise in more remote areas. However, he said it is too early to tell what the future holds.
Many times throughout history, the most significant correlations between a national phenomenon and its economic impact are seen years after a major event when the narrative takes form. For example, the stock market crash of 1929 affected the public’s trust in banks and also changed housing markets and policy leading up to World War II. Shiller suggested that the increasingly frequent use of words and phrases like “panic” and “the Great Depression” in newspapers and literature contributed to economic tipping points for years after.
Though past events seem removed from our current worldview, the economist proposed that more consideration of past narratives could lead to a better way to forecast the future and suggested that students can benefit from this perspective.
“You’re not wasting time when you read psychology, sociology, or history,” Shiller said. “I believe that successful people are people who have a feeling for the world around them. Ultimately, these are the kinds of things that are not replaceable.”
