Can we affect the rise and fall of the economy? This week on Hidden Brain, we talk with Nobel Prize-winning economist Robert Shiller about the powerful ways in which stories and psychology shape our economic lives. He argues that narratives affect not just the purchases we make as individuals, but the fate of our entire economic system.
The transcript below may be for an earlier version of this episode. Our transcripts are provided by various partners and may contain errors or deviate slightly from the audio.SHANKAR VEDANTAM, HOST: From NPR, this is HIDDEN BRAIN. I'm Shankar Vedantam. We begin today with a story of an economic bubble, or, to be more precise, a mania.UNIDENTIFIED PERSON #1: (Foreign language spoken).VEDANTAM: This mania took place in Amsterdam in the 1630s. Picture a city of canals, elegant townhouses and a populace obsessed with one thing...UNIDENTIFIED PERSON #1: (Foreign language spoken).VEDANTAM: ...Tulips.UNIDENTIFIED PERSON #1: (Foreign language spoken).ROBERT SHILLER: Amsterdam was the site of a big flowers market; it still is. People would trade tulips. And there were some tulips that were especially beautiful, they thought. And so people wanted those, and the price started going up.VEDANTAM: This is economist Robert Shiller. And when he says prices started going up, what he means is they started going up a lot.SHILLER: People were getting rich trading in tulips. One tulip would be the same value as a whole house.VEDANTAM: One tulip could hold as much value as a house. Now, historians say they've only found a few examples of this, but even more modestly priced tulips could sell for what would today be thousands of dollars.UNIDENTIFIED PERSON #2: (Foreign language spoken).VEDANTAM: From a distance of nearly 400 years, the Dutch tulip mania of the 1630s might seem absurd, but the flowers were a way for the residents of Amsterdam to convey that they were cultured and influential. The tulips had great symbolic value. They told an amazing story.(SOUNDBITE OF MUSIC)VEDANTAM: This week on HIDDEN BRAIN - the powerful way in which stories and psychology shape our economic lives, how narratives affect not just the purchases we make as individuals but the fate of our entire economic system.(SOUNDBITE OF MUSIC)VEDANTAM: Most people think of the economy as following a set of fairly scientific principles. I buy more if things are cheap. I buy less if they're expensive.(SOUNDBITE OF ARCHIVED RECORDING)UNIDENTIFIED REPORTER #1: The nation's gross domestic product, or GDP, grew at a stronger than expected rate of 2 1/2%.VEDANTAM: Or say I run a company. I hire people if it looks like the economy is growing. I cut back if it looks like things are going to tank.(SOUNDBITE OF ARCHIVED RECORDING)UNIDENTIFIED REPORTER #2: Delayed hiring, 4% accelerated hiring. You can see there mostly just going down.VEDANTAM: If I run the Federal Reserve, economic indicators tell me whether to raise or lower interest rates.(SOUNDBITE OF ARCHIVED NPR BROADCAST)AILSA CHANG: The central bank is cutting interest rates for the third time since July.VEDANTAM: It all looks very rational, very mathematical.(SOUNDBITE OF MUSIC)VEDANTAM: But this picture neglects a fundamental aspect of economic life. We live in a world of stories. The stories that we tell in news reports, around the water cooler, in conversations with friends and family, these stories profoundly shape the trajectory of the economy. Economist Robert Shiller's new book explores this idea. It's called "Narrative Economics." The winner of the 2013 Nobel Prize in economics, Robert Shiller says his interest in the relationship between stories and the economy goes all the way back to his early college days. He was an economics major, but he took a history course that examined the Great Depression. He was struck by the disconnect between the economic ideas he was learning about and the stories he read about how people behaved in the real world.SHILLER: People didn't sound like the people described in my economic theory. They seemed to be faddish and vulnerable to crazes and new ideas, and then they'd drop them and forget them. It just seemed like there was a note of reality that has been lost when we separate out departments. A history department has something to offer; so does the psych and sociology department, et cetera. But we tend to be - in academia, we tend to be polarized or more than polarized. We tend to compartmentalize. And I've, all my life ever since, thought that I wanted to read what these other people were saying as well as what my economist people are saying.VEDANTAM: Because, of course, they're all just different ways to understand the human condition, right? I mean, psychologists and anthropologists and sociologists and economists, I mean, they're all basically trying to understand why people do what they do. They're just using different tools.SHILLER: And political scientists.VEDANTAM: Yeah, yeah.SHILLER: Yeah. So we need all these perspectives. Don't be too compartmentalized. It may carry you for a while, but if you don't know what's happening in other realms of thought, you might miss the big picture.VEDANTAM: Robert says these realms of thought can help us decode things that otherwise seem puzzling about the economy. Take for example the story of a paper written by a mysterious mathematician in 2008. The author went by a pseudonym.(SOUNDBITE OF ARCHIVED RECORDING)UNIDENTIFIED PERSON #3: Satoshi Nakamoto.VEDANTAM: Satoshi Nakamoto.(SOUNDBITE OF MONTAGE)UNIDENTIFIED PERSON #4: Who is Satoshi Nakamoto?UNIDENTIFIED PERSON #3: Satoshi Nakamoto is a fake name for somebody.NEHA NARULA: He's a myth. I mean, he doesn't - no one knows who he is. Some people have claimed to be Satoshi Nakamoto, but we have not seen any definitive proof.ANDY COURT: When you ask about the creator - who created this? Who invented this? They must be a real genius. Everyone's like, we have no idea.VEDANTAM: The reason Satoshi Nakamoto created such a stir - this person, whose identity is still unknown, came up with a new type of currency - bitcoin.SHILLER: The first successful cryptocurrency. The story was that Nakamoto was able to invent a currency that could function without the help of any government, even against the opposition of any government.(SOUNDBITE OF ARCHIVED RECORDING)UNIDENTIFIED REPORTER #3: Bitcoin emerged as the digital currency that in theory could not be manipulated by a central authority.SHILLER: And it would be smart, young, cosmopolitan people all over the world who would secure this decentralized system. It's a wonderful story and especially wonderful since nobody could figure out who Satoshi Nakamoto really was.VEDANTAM: (Laughter).SHILLER: He never - can't be found. No one has met him. How did he do that? That's an amazing story.VEDANTAM: Robert makes the case that bitcoin spread because it was a tale with surprise and intrigue. A genius mathematician invents a cryptocurrency and becomes a billionaire. It sounds like the plot of a movie. If I was making that movie, one subplot I would include is the story of the singer Lily Allen.(SOUNDBITE OF SONG, "THE FEAR")LILY ALLEN: (Singing) I want to be rich and I want lots of money. I don't care about clever. I don't care about funny.VEDANTAM: Lily Allen received an offer to get paid for a performance in bitcoin.SHILLER: She turned it down. That was the most momentous error you can imagine because she would be a billionaire if she had taken that bitcoin.VEDANTAM: (Laughter) And, you know, you hear the story and even if you don't know anything about cryptocurrencies, you ask yourself, am I missing out by not getting in on this? I mean, the story induces FOMO.SHILLER: That's exactly right, and that's a strong emotion, fear. It's regret theory. People are fearful of being regretful that they miss something. It hurts. You don't want to look forward to that pain in the future, so you might as well try. That's the thinking.VEDANTAM: What's astonishing is that the craze over bitcoin spread even though very few people actually understand what a cryptocurrency is or understand its underlying blockchain technology. But these terms very quickly became buzzwords. Here's comedian John Oliver on "Last Week Tonight."(SOUNDBITE OF TV SHOW, "LAST WEEK TONIGHT WITH JOHN OLIVER")JOHN OLIVER: The problem is there is now enough excitement around the very word blockchain that it's become a magnet for investment. Reuters found that the existing companies that merely added the word blockchain to their name saw their stock price on average increase more than threefold. And one of them was particularly dumb.UNIDENTIFIED PERSON #5: Long Island Iced Tea renamed themselves Long Blockchain. And guess what happened. Yeah, their stock tripled.VEDANTAM: Robert, so you write at one point that the total value of bitcoin exceeded $300 billion, but bitcoin has no value unless people think it has value. So something that existed purely in people's heads went from being worth $0 to $300 billion?SHILLER: Yes, it can easily happen if the viral effect is strong enough. Now, bitcoin enthusiasts will say, well, what about gold? Gold has no real value. It's just a shiny metal that's pretty to look at. And yet it has tremendous value, and it has for thousands of years. But I have to say there are some differences. Gold is scarce - inherently scarce. Anybody can start a new cryptocurrency. Gold is in the Bible. It's mentioned over 300 times in the Holy Bible.VEDANTAM: You know, I was thinking about this as I was reading the book. You know, when I think about real money, obviously, real money, you know, has on many occasions bought me real things. But at some level, doesn't real money function a little bit like bitcoin in that it requires you and I to both agree that the notes that I have in my wallet have real value, that in some ways we both agree on the story of what the notes mean and the story is what gives the notes their power?SHILLER: That's right. That's - you've spoken just perfectly about narrative economics. I'll give you another example - banks. Why don't banks fail? All it takes is a story. If someone says the bank is going to be bankrupt soon, everybody will rush in and try to take their money out. And the banks can't - they don't have it on hand. They can't pay it out. So that's another example of how, yes, our whole banking system is built on a narrative.VEDANTAM: Yeah. Because at any given point, the bank might have enough money cash on hand to basically pay out, you know, five or 10% of what its total assets are. It's investing the rest of the money in other projects. So if everyone asks for their money back at the same time, the bank would simply not be able to deliver.SHILLER: And it happens, and it's supported by visual imagery. Photographers go to the bank, and they take a photograph of the big crowd clamoring to get in to get their money out. This has happened so many times that the FDIC - Federal Deposit Insurance Company - has a gallery of photos in one of their residences. And so it's become a narrative in itself that we have to watch out for that it doesn't come back. It's a perennial narrative.VEDANTAM: So bitcoin was not just a mysterious new scheme. It tapped into many deep and ancient narratives about ordinary people and elites, about anarchy, about populism. Talk to me about those larger themes that it tapped into.SHILLER: Well, there was a movement that began in the 19th century with the philosopher Proudhon called anarchism, which took an extreme statement that we don't need any government. If we just leave the people alone with no government, they will do much better. People are naturally inclined, many people, to anarchism, and so they're so happy to hear of bitcoin...(SOUNDBITE OF MUSIC)SHILLER: ...Which was claimed can't be controlled by the government because bitcoin is for the whole world. It just sounds so enlightened and brilliant.VEDANTAM: And in some ways, if you feel like you are part of the large number of people who doesn't have power, who doesn't have a voice and you feel like powerful elites are running your life, as many people do, in some ways, bitcoin is - you know, it's sort of - you're throwing a rock against the edifice of the elites. You're basically fighting back in some ways.SHILLER: Right. And when you buy bitcoin, you feel like you're on the bright side of things. You're an owner of some of this fancy computer stuff in a sense.VEDANTAM: Yeah.SHILLER: And you're part of it.VEDANTAM: Yeah, you're one of the disruptors; you're not the ones being disrupted.SHILLER: That's the hope that it gives you. Yes.VEDANTAM: Robert says these underlying currents help explain why a story like bitcoin took off. If psychology and sociology explain the origins of economic fads, Robert draws in ideas from another field - medicine - to understand how such fads spread and when they die. Stories, he says, function like viruses or parasites. They spread only when they have a receptive host.SHILLER: It is really important to understand that things that are popular are the result of contagion. There is a contagion rate which varies through time. There's also a recovery rate - how soon people forget about the narrative. This is just straight out of medical epidemiology. The contagion rate has to be higher than the recovery rate and then the epidemic will take off. It'll start small, but it will get bigger and bigger until the contagion rate falls down below the recovery rate, and then it starts to recede. It's mysterious because we don't normally think about the contagion rate and the recovery rate for stories. But that, in fact, are basic parameters that explain when they get strong and when they fade away.VEDANTAM: And, of course, for the people who haven't invested in bitcoin, who didn't get in on the craze, you know, those people might listen to this and say, hang on a second, I wasn't affected by the story. But in some ways, that's not different from an epidemic. Not everyone falls sick when an epidemic is raging.SHILLER: Yeah. So if you have not invested in bitcoin, that's not necessarily a sign of your common sense. It's just that you never encountered a contagious person who is spreading the word.(SOUNDBITE OF MUSIC)VEDANTAM: Bitcoin is a single story. When we come back, Robert Shiller makes the case that narrative economics can explain larger phenomena, including shifts in the entire economy.(SOUNDBITE OF MUSIC)VEDANTAM: Robert, in your book, you write, when we choose to tell a story to others, we base that choice on our perceptions of how people will react to that story in their own minds. We will likely spread a story, whether it is a story about boom-time thinking or about economic despair, if we think that others will like the story enough to want to spread it further.Talk about this idea that part of the reason stories spread - and some stories spread more than others - is that we are actually, each of us, gauging whether if we tell the story to somebody else, they, in turn, would want to pass it on.SHILLER: Right. It's what psychologists call theory of mind. That is, we are always thinking about what we imagine other people are thinking. That's because understanding other people's thinking is very important for success in human society. People enjoy conversation. It's part of our species. It's everywhere in the world. Everywhere you go, you'll see people standing facing each other engaged in conversation. And if you get a translation of what they're saying, they're telling stories (laughter). And people, when they hear a story, they turn it over in their mind and say, maybe I could use this story in another conversation. So people evaluate them based on their apparent success in motivating other people. So yeah, it's as if people are all trying to go viral. It's not a new thing with the Internet. They were going viral thousands of years ago.(SOUNDBITE OF MUSIC)VEDANTAM: Nearly a century ago, a powerful story swept the country. It's a story that has echoes in our own time, and the lessons from history are instructive. In the 1920s and '30s, many people feared that technological innovations were going to disrupt the economy and put lots of people out of work.(SOUNDBITE OF ARCHIVED RECORDING)UNIDENTIFIED REPORTER #4: For the majority, it means the interminable line outside factory gates, desperately hoping for a job that rarely comes.SHILLER: It explains some things that got out of hand and bad. The Great Depression of the 1930s came shortly after the term technological unemployment became popular in the late 1920s about machines replacing jobs.(SOUNDBITE OF ARCHIVED RECORDING)UNIDENTIFIED REPORTER #5: Machines replaced hands. New machines replaced old machines. New inventions - the electric light, automobile, telephone - started as luxuries, then, as they were made better and cheaper, became commonplace.SHILLER: And when the unemployment rate got high after 1930, people started to think, this is it. It's robots replacing our jobs. And you may think, it's pretty strange that people thought about robots in 1930. That sounds like long before they had computers. But they did think they had robots. I'll give you an example of what they called a robot.(SOUNDBITE OF ROTARY PHONE DIAL SPINNING)SHILLER: It's the dial telephone. Before that when you picked up a phone, there was no dial, no keypad. You had to just - there was an operator there and it would say, number, please.UNIDENTIFIED OPERATOR: Number, please.SHILLER: They replaced that operator with a machine. That's called a robot. And it scared people then. And they thought that, maybe we better fall back and save some more money. When everybody does that, it makes the depression worse.VEDANTAM: So one of the interesting points you make is that stories vanish and resurface, like the story you were just telling about technological innovation displacing workers. And sometimes these stories vanish and come back over decades or even centuries. And that really is analogous to what happens with pathogens that go dormant and then they reemerge sometimes decades later as epidemics.SHILLER: That's right. And a pathogen can reemerge because of a mutation. Like, influenza mutates quite regularly, and we have to get inoculated imperfectly against those mutations. Or it can change because of some change in our practices. If there's some event that brings people closer together in an enclosed space, it can spread much more rapidly and the contagion rate goes up.So these are fundamental lessons that I don't hear very often from most economists. They don't talk in these terms, and they don't see the causal impact from narratives to the economy.VEDANTAM: So it's interesting. When we think about stories - and if you draw the analogy with pathogens, perhaps then modifications to stories or tweaks in an underlying story might be necessary for a dormant story to come back and become dominant again.SHILLER: Yes. And so sometimes the tweaks are just frivolous sounding. I'll give an example from my book. The idea of trickle-down economics where you cut taxes on the rich on the theory that they will raise GDP and, ultimately, enrich the poorer people was starting to look pretty old by the 1970s.But then a new narrative appeared that was really written by a writer Jude Wanniski about the Laffer curve. And it was basically the same theory that if you cut taxes, GDP will go up and tax revenues will even go up. You just have to cut taxes. That was a lovely story, and it was embellished by details, visual images. Like, it was said that Arthur Laffer, the economist, presented his idea - new idea about taxes in the form of a diagram which he drew on a napkin at a fancy restaurant with Defense Secretary Donald Rumsfeld and future Vice President Dick Cheney. Putting these names at a visual image of a diagram drawn on a napkin was all that that narrative needed to get epidemic again.VEDANTAM: (Laughter).SHILLER: And that led to, I would say, Margaret Thatcher's ascendance to the prime minister in Britain in '79 and then Ronald Reagan, president of the United States - both tax cutters.VEDANTAM: So the diagram drawn on that napkin eventually came to be called the Laffer curve. Explain what that curve is. Explain what the very simple intuition is behind that curve that eventually led to fairly significant policy changes on both sides of the Atlantic.SHILLER: Yeah. It's almost - the Laffer curve story, it's almost like a joke with a punchline. So what Laffer said is, if we have a 0% tax rate on incomes, how much will we collect? Zero, obviously. But what if we have a 100% tax rate on incomes, what will we collect? Well, it'll be zero again because nobody's going to work if the government takes all of it. So in between, the revenue has to be positive. So connect the dots and you have a hump-shaped curve. That means that to raise any given amount of revenue, there are always two tax rates - a low one and a high one. You can picture that on my diagram, which I'm asking you to make a mental image of.And so that's a new idea. Nobody has been talking about two tax rates to raise the same revenue. It's clever. It's like a - it's a stunt, a trick. It's a magic trick. It's fun. You can have - you'll know that you'll get a rise out of people if you explain it well enough and tell such a story. So it went absolutely viral - not just in the United States, it spread all over the world.VEDANTAM: It might be hard to visualize this curve, but think about it this way. As Robert says, the government raises $0 in taxes where the taxation rate is zero but also when it is 100%. Think of what would happen if the tax rate was 1% or 99%. In both cases, the government would raise only a small amount of money. When it's 1%, a lot of people would go to work, but the government would get only a small portion of their income. When it's 99%, the government would also get very little because only a few people would work when 99 cents of every dollar are taken away from them. You can imagine the same dynamic playing out at other levels of taxation. The intuitive idea here is that there can be two levels of taxation that produce the same amount of revenue. If that's the case, you can make everyone happy by taxing people at a lower rate.SHILLER: You've got to give Art Laffer credit for that - seems obvious now. And it had big, profound effects. It was a big epidemic in the '70s and early '80s, but it's coming back now. Arthur Laffer is still there and he's still gloating in his great success. That was the best thing he ever did in terms of narrative quality.VEDANTAM: So is it true that Art Laffer himself has debunked the story about the napkin and the story with Don Rumsfeld and Dick Cheney in the restaurant in Washington?SHILLER: Well, the National Museum of American History in Washington was designing an exhibit on business history. And they had the idea that it would be good to get the napkin. And maybe - well, Jude Wanniski, the author of the story, had died. They called his widow and asked her, we're looking for a napkin with a diagram drawn on it...VEDANTAM: (Laughter).SHILLER: ...Can you look around his things? And she - then she called back and said, yes, I found a napkin with a diagram. So she gave it to them and they proudly put it in their display. You can find it searching on the web. And they tell you it's - they tell you they're very proud to have this exhibit. But there is one problem with it. That a reporter later called Art Laffer and asked him about it and he said, I don't believe that story. He said, I don't remember writing on a napkin. And moreover, my mother taught me - it would be a cloth napkin at a fine restaurant. My mother taught me not to do such things.VEDANTAM: (Laughter) Well, I mean, what's fascinating, of course, is that's such a good story and it's such a fun story that it almost feels a pity to apply the facts to it and debunk it.SHILLER: And that applies to conversation, generally. Yeah. How many people actually fact-check their stories when they tell them?VEDANTAM: The Laffer curve is still being debated by economists. While the curve might make sense at the ends of the taxation spectrum, it might not describe what people do at realistic levels of taxation. Most governments aren't choosing between a tax rate of 10% and a tax rate of 90%. They're choosing between 25% and 30%. That means drawing implications from the Laffer curve might not make much sense.But in the 1980s, the story of the Laffer curve proved irresistible. Calls to reduce taxation were buttressed by other stories like this one from President Ronald Reagan...(SOUNDBITE OF ARCHIVED RECORDING)RONALD REAGAN: They only know how many checks they're sending out.VEDANTAM: ...To showcase wasteful government spending.(SOUNDBITE OF ARCHIVED RECORDING)REAGAN: In Chicago, they found a woman who holds the record. She used 80 names, 30 addresses, 15 telephone numbers to collect food stamps, Social Security, veterans benefits for four nonexistent deceased veterans husbands as well...VEDANTAM: So, Robert, tell me how Reagan's stories about so-called welfare queens intersected with these ideas from the Laffer curve and eventually changed federal policy.SHILLER: Yeah. Well, Reagan was a good storyteller by the way. So he had a great deal of power from that. That kind of story elicits anger, and anger is a strong emotion. But the problem with that story is it's not a statistic. It's just a - in fact, it's the record holder, so, I mean, there's only one like her. And - but storytellers don't care. They tell anomalous and rare events as if they're common. And if it's contagious like that, it generates fake news.VEDANTAM: You were talking a second ago about how President Reagan, in some ways, was a marvelous storyteller. One of his stories affected not just how individuals and companies act but perhaps even how nations act. He liked to tell a story about the failures of communism in Soviet Russia where people had to wait for years to get routine household services. In one joke he told to many audiences, he described a man who goes to buy a car and is told he has to wait for 10 years.(SOUNDBITE OF ARCHIVED RECORDING)REAGAN: But this man, he laid down his money and then the fellow who was - that was in charge said to him, OK, come back in 10 years and get your car. And he said, morning or afternoon?(LAUGHTER)REAGAN: And the fellow behind the counter said, well, 10 years from now, what difference does it make? And he said, well, the plumber's coming in the morning.(LAUGHTER)VEDANTAM: And what is so effective here, Robert, is that Reagan is not saying explicitly communism doesn't work. That message is embedded inside the joke, and that's the power of the story.SHILLER: Yeah. And it also shows an example of the tendency for stories to go viral that are associated with a celebrity. The real author of that story is someone living in Russia, I suppose, who gets no credit for it. It really goes viral when it's connected with someone that we know. And that's just the way we are. Lots of famous quotes in history turn out not to have been first said by the famous person. The famous person was quoting somebody else that he doesn't care about.VEDANTAM: Yeah. And isn't it also the case that sometimes the stories might not even be true? I mean, we don't even know whether there actually was a specific person in the Soviet Union who came up with this. There have been questions raised about the welfare queen story that Reagan told, for example. And in some ways, once a story is traveling and it's embedded, the truth is often not sufficient to demolish it.SHILLER: Yes, and this is not a new problem. It goes way back.(SOUNDBITE OF MUSIC)VEDANTAM: If you turn on the news these days, there is a powerful story that's in circulation that tells us that a long period of economic expansion is soon going to be over.(SOUNDBITE OF NEWS MONTAGE)UNIDENTIFIED REPORTER #6: Although things may look good for now, many Wall Street analysts are concerned about the warning signs ahead...UNIDENTIFIED REPORTER #7: Red recession warning light now flashing for the first time since 2007...UNIDENTIFIED REPORTER #8: As a key predictor of recession is now flashing...UNIDENTIFIED REPORTER #9: Bond markets once again flashing that ominous recession warning signal...UNIDENTIFIED REPORTER #10: The economy could be headed for turmoil...(SOUNDBITE OF ARCHIVED NPR BROADCAST)CHANG: Falling 800 points, losing 3% of its value.VEDANTAM: What do you tell people when they ask you to predict the next recession? And by the way, that's me indirectly asking you to predict the next recession.SHILLER: My feeling is that we are at a heightened risk of a recession and having a recession before the 2020 elections in the U.S. might might even be 50%. You'll see clear evidence of a recession coming. But I can't go above that. There will be another recession. We know that. But the other question that - people tend to talk about all or nothing. Will we or will we not have a recession? The question is if there is - another question, which I like to entertain, if there is a recession, is there a chance that it will develop into a severe recession? And I'm worried about that, even though I can't tell you precisely whether we'll be in a recession. And I think there are narratives today that might worsen a recession, notably the artificial intelligence narrative, which in an earlier form in the Great Depression really did heighten the impact of the Depression. We can see that again people becoming conservative in their expenditure because they're afraid of losing their jobs. It's already going on in some parts of the country, but it could become big.VEDANTAM: One point that Robert makes is that the veracity of economic narratives is not the point. Stories can invent their own reality. One example he gives is the narrative around Japan's Lost Decade, a period of economic stagnation during the 1990s and early 2000s.SHILLER: The Lost Decade story for Japan was particularly impactful since it followed the 1980s when Japan was considered the economic powerhouse of the world. People were saying that nobody can compete with Japan. They've pushed out Western makers of cameras, stereo equipment. They're hammering away at their sales of cars. There were books written back then about the Japanese miracle, and then suddenly it went sour in the 1990s.VEDANTAM: I'm wondering if President Donald Trump might be a fan of your book, whether or not he's actually read it, because he clearly also believes in the power of stories. Here he is talking down the risks of an impending recession.(SOUNDBITE OF ARCHIVED RECORDING)PRESIDENT DONALD TRUMP: I don't think we're having a recession. We're doing tremendously well. Our consumers are rich. I gave a tremendous tax cut. And they're loaded up with money. They're buying. I saw the Walmart numbers. They were through the roof just two days ago. That's better than any poll. That's better than any economist.VEDANTAM: So, Robert, given what you say about how talk can shape economic reality, is President Trump absolutely right to be spinning a positive story?SHILLER: Well, I wouldn't use the word absolutely right. That's a little strong. But he is having an impact, I believe. It's not just his current spinning of the story. He's written many books with co-authors. These books have advice to be like him. He tells you how he did it. He tells you, for example, don't be afraid to boast about yourself because, you know, people are maybe a little resentful about boasting people, but in the long run, they believe in them because they - if you don't boast, nobody will hear about your successes. This is Donald Trump talking. He's telling you to spread your personal narrative aggressively, and he's been doing that for himself for 50 years. And it's worked.(SOUNDBITE OF MUSIC)VEDANTAM: Robert Shiller won the 2013 Nobel Prize in economics. He's the author of "Narrative Economics: How Stories Go Viral And Drive Major Economic Events." robert thank you for joining me today on HIDDEN BRAIN.SHILLER: Shankar, thanks. It was a pleasure.(SOUNDBITE OF MUSIC)VEDANTAM: This week's episode was produced by Thomas Lu and edited by Jenny Schmidt and Tara Boyle. Our team includes Parth Shah, Raina Cohen and Laura Kwerel. Special thanks to Remco Zwetsloot (ph) and Laura Beltran Villamizar (ph). Our unsung hero for this episode as Christian Kertin (ph). Christian is NPR's financial controller. He and the talented accounting team at NPR make sure that bills get paid, revenues get collected and the organization follows tax and accounting rules. Christian has helped me on many occasions think through the financial models for HIDDEN BRAIN and the implications of different choices. He's great at seeing the stories behind the numbers and finding ways to tell those stories eloquently. Thank you, Christian. For more HIDDEN BRAIN, you can follow us on Facebook and Twitter. If you like this episode, please be sure to share it with a friend.SHILLER: It sounded like you have a fun show. I like it.VEDANTAM: It is a fun show. You should subscribe, Robert.SHILLER: All right.VEDANTAM: (Laughter) Take care.(SOUNDBITE OF MUSIC)VEDANTAM: I'm Shankar Vedantam, and this is NPR. Transcript provided by NPR, Copyright NPR.