While modern capital markets are dominated by algorithms that mercilessly solve for efficiency, Robert Shiller, a Nobel Prize winner in economics, suggests that we also follow “narrative economics.” In an interview with David Katz for CFO.com, Shiller suggests that the stories that dominate the news and our everyday conversations can shape the economy in their own way. The recession of 1920 might not have happened, he suggests, if US citizens hadn’t become so suspicious of businesses. Moreover, he believes data analysis can capture and interpret these narrative trends. Bottom line: “You have to be a compiler of many narratives” and use “the combined effect of multiple narratives” to supplement your number-crunching, he says.
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