How storytelling drives finance and economics

Throughout financial history, there are many examples where powerful narratives have driven markets

In his recent presidential address to the American Economic Association, Nobel Laureate Bob Shiller drew attention to the importance of narratives in economics and, particularly, in financial markets. This corroborates some recent research by the author and colleagues at the University of Queensland into the psychology of economic behaviour.

When we tell ourselves stories, we link up a number of different events into a coherent whole. In financial markets and across the economy as a whole, these stories not only affect expectations but are expectations. And expectations shape behaviour.

Our research shows that the more simple