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The Godley-Tobin memorial lecture: Animal spirits and viral popular narratives

Author

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  • Robert J. Shiller

    (Sterling Professor of Economics, Cowles Foundation, Yale University, New Haven, CT, USA)

Abstract

John Maynard Keynes's (1936) concept of ‘animal spirits’ or ‘spontaneous optimism’ as a major driving force in business fluctuations was motivated in part by his and his contemporaries' observations of human reactions to ambiguous situations where probabilities couldn't be quantified. We can add that in such ambiguous situations there is evidence that people let contagious popular narratives and the emotions they generate influence their economic decisions. These popular narratives are typically remote from factual bases, just contagious. Macroeconomic dynamic models must have a theory that is related to models of the transmission of disease in epidemiology. We need to take the contagion of narratives seriously in economic modeling if we are to improve our understanding of animal spirits and their impact on the economy.

Suggested Citation

  • Robert J. Shiller, 2021. "The Godley-Tobin memorial lecture: Animal spirits and viral popular narratives," Review of Keynesian Economics, Edward Elgar Publishing, vol. 9(1), pages 1-10, January.
    • Handle: RePEc:elg:rokejn:v:9:y:2021:i:1:p1-10
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    Citations

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    Cited by:

    1. Vyacheslav V. Volchik & Elena V. Maslyukova & Sophia A. Panteeva, 2022. "Evolution of the Russian innovation system: Narratives and the impact on economic growth," Journal of New Economy, Ural State University of Economics, vol. 23(4), pages 6-25, January.
    2. Lim, King Yoong & Morris, Diego, 2023. "Business optimism and the innovation-profitability nexus: Introducing the COVID-19 adaptable capacity framework," Research Policy, Elsevier, vol. 52(1).
    3. Virla, Leonardo Quero, 2021. "An empirical characterization of volatility dynamics in the DAX," IPE Working Papers 167/2021, Berlin School of Economics and Law, Institute for International Political Economy (IPE).
    4. Vyacheslav V. Volchik & Elena V. Maslyukova & Sophia A. Panteeva, 2022. "Innovation indicators in the context of narrative economics," Journal of New Economy, Ural State University of Economics, vol. 22(4), pages 24-44, January.

    More about this item

    Keywords

    economic fluctuations; uncertainty; ambiguity; confidence; epidemics; contagion; viral stories; Keynes; supply-side economics;
    All these keywords.

    JEL classification:

    • D9 - Microeconomics - - Micro-Based Behavioral Economics
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • E71 - Macroeconomics and Monetary Economics - - Macro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on the Macro Economy
    • G4 - Financial Economics - - Behavioral Finance

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