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According to the World Health Organization, health-care workers were twenty-one to thirty-two times more likely to catch the disease than the general population there, and there were confirmed and probable cases of health-care worker infection as of Most of these workers died. The history of quarantines extends back at least to when the city of Venice imposed during a plague a thirty-day isolation period on arrivals by sea, and then a forty-day isolation period for travelers by land the word quarantine derives from the Latin word for forty.
The world has also seen occasional attempts to increase contagion as an act of war, as with the catapulting of dead bodies of plague victims into a fortified city at the Siege of Caffa, This pool decreases through time because many people who had the disease are now immune to it or dead. This mechanism, modeled in the appendix p. Eventually, those epidemics ended before everyone was infected. When the contagion rate is lower than the recovery rate plus the death rate, the disease does not disappear immediately.
The contagion rate is not reduced to zero. All that is necessary to conquer the epidemic is to lower the contagion rate below the recovery rate. Unless the contagion rate is zero, there will still be new cases of the disease, but the total number of sick people declines, gradually tailing off to zero, at which point the epidemic ends.
We are talking here of the average contagion rate and average recovery rate, averaging over many people. However, both the contagion rate and the recovery rate can differ greatly from one individual carrier to another. A relatively small percentage of super-spreaders can infect many people. Both the appearance of the disease epidemic at a given time and place, and the decline in the epidemic after its peak tend to be mysterious.
Many factors influence the contagion rate and recovery rate, factors that may be hard to document. For example, the ultimate reason for the recovery could be a change in the weather, which is more readily documented, or it could be a decrease in the number of encounters between people that allow for transmission of the disease, which might be hard to document. Or it might be some combination of the two. The changes need not be big or obvious. We can apply this same model to epidemics of economic narratives.
Contagion occurs from person to person through talk, whether in person or through telephone or social media. Once again, the ultimate causes of the epidemic might not be obvious. Fortunately, most economic narratives do not result in deaths, but the basic process is the same. For example, when Ebola is found to have infected hundreds of people in one town and virtually nobody in another, the explanation could be some inconspicuous factor that made Ebola contagion rates higher in Town 1 than in Town 2, putting the Town 1 contagion rate above the recovery rate at the beginning of the epidemic.
Similarly, with narrative epidemics there may be two different narratives, one with some minor story details that make it more contagious than the other. The minor story details make the first narrative, and not the second, into an epidemic. Contagion of the Bitcoin Narrative Figure 3. This figure is not a plot of a price but rather an indicator of public attention. Both bimetallism and Bitcoin represent radical ideas for the transformation of the monetary standard, with alleged miraculous benefits to the economy.
Each word is a marker for a constellation of stories that include not only stories of theory but also human-interest stories. The plots for both words look quite similar, and each is similar to a typical infective curve as seen in Figure 3. We will discuss the remarkable bimetallism epidemic at length in chapter 12, along with other narrative epidemics.
For now, it is enough to know that bimetallism and Bitcoin both invoke monetary theory. In both cases, an enormous number of people began to regard a particular innovation as cool, trendy, or cutting-edge. In both cases, the contagion is represented by a hump-shaped curve resembling an epidemic curve. In fact, the bimetallism and Bitcoin narratives played out over years, rather than weeks as in the case of Ebola, but the same epidemic theory applies to all three.
In the case of bimetallism, we also see a smaller secondary epidemic in the s, during the Great Depression, but it never amounted to much. It was like a secondary epidemic of a disease. So narrative epidemics really mimic disease epidemics. And it is more than just that. It is interesting also to note that there are co-epidemics of diseases and narratives together.
Medical researchers in the Congo during a outbreak of Ebola linked the high contagion to narratives reaching the population. These narratives discouraged prevention measures and amplified the disease. The appendix to this book looks at theories and models from epidemiology, including the original Kermack-McKendrick SIR model, to help explain the spread of economic narratives.
These models divide the population into compartments: susceptible to the disease S , infected and spreading the disease I , and recovered or dead R. All of the models feature contagion rates and recovery rates. We can think of Figures 3. These models tend to predict hump-shaped paths for an epidemic, like that in Figure A. The epidemic will eventually start weakening because the percentage of the population that has still not been exposed to the disease is declining, bringing down the contagion rate below the recovery rate.
In the appendix we will see also that the time to peak and the duration of an epidemic can vary widely, determined by model parameters. The Ebola epidemic ran for a matter of months in a given locale, but we should not assume that all epidemics must follow that same short timetable. In other words, the Ebola epidemic could have stretched on for years if the initial contagion rate had been lower, so long as contagion did not fall below recovery.
For example, epidemiologists have described the acquired immune deficiency syndrome AIDS caused by the human immune deficiency virus HIV as not very contagious, and they have recommended that health-care professionals should not shrink from treating HIV patients for fear of catching it.
AIDS has been a slow epidemic, developing over decades, even slower than the bimetallism and Bitcoin epidemics, and it is able to grow despite low contagion because it has a smaller recovery rate: an HIV-infected person can continue to infect others for many years. The Contagion of Economic Models In , Jean-Baptiste Michel and a team of coauthors published an article in Science providing evidence that mentions of famous people in books tend to follow a hump-shaped pattern through time, rising, then falling, over decades rather than months or years.
The same patterns seem to apply to economic theories. In chapter 5 we consider the contagion of one of these narratives, the Laffer curve, a simple model of the relationship between tax rates and the amount of tax revenue collected. Figure 3. Samuelson, ,7 the overlapping generations model Samuelson, , and the real business cycle model Finn E.
Kydland and Edward C. Prescott, All show hump-shaped patterns similar to those of disease epidemics. None of them has been proven completely right or wrong. They are all potentially interesting. Each of them is a story whose popularity followed the expected path of an epidemic. For three of the models, the epidemic first became visible more than a decade after the model was introduced, a phenomenon that we also see in the medical-epidemic framework, where epidemics may go unobserved for a while after very small beginnings.
The number of cases may be growing steadily percentage-wise, but the disease fails to be widely noticed until the number of cases hits a certain threshold. In practice, the long lag between the publication of an economic theory and its eventual strong epidemic status represents a time interval over which the model evolves from something regarded as peculiar and thought provoking into something that is clearly correct and recognizably great. Over this gestational interval, other scholars in the discipline increasingly appreciate the model, and the epidemic spreads through academic rituals, such as paper presentations at seminars and major conferences.
Still later, the model is talked about enough that the news media begin to feel that it should be mentioned, and people outside of the economics profession who pride themselves on their general knowledge begin to feel they should know something about it. But in this late stage of the epidemic, the model may begin to lose some of its contagion. Some people begin to consider it stale and unoriginal even if it has merit, while others end up forgetting about it completely.
Economic historian Warren Young suspects that the contagion of the IS-LM diagram had something to do with its resemblance to the intersection of supply and demand that is perhaps the most famous image in all of economics. Keynes was a brilliant writer, but as we have seen, many narratives are associated with celebrities. Keynes himself was a colorful figure and a celebrity in his own right: he hobnobbed with the Bloomsbury group of artists and intellectuals, among other celebrities including the writer Virginia Woolf, who was embarking on her own epidemic of fame, which did not peak at least until near the end of the twentieth century, long after her death in Keynes was reputed to be gay or bisexual, and his male relationships were well known among the tolerant Bloomsbury group, providing a spicy bit of gossip that, at that time, could travel only by word of mouth.
Keynes later married a beautiful ballerina, Lydia Lopokova, who experienced her own epidemic of popularity after she retired from dancing, likely because of her association with Keynes. These histories resemble not only the normal course of a disease epidemic but also the life history of other kinds of narratives.
Their ability to direct thought and action becomes much diminished. A key proposition of this book is that economic fluctuations are substantially driven by contagion of oversimplified and easily transmitted variants of economic narratives. As with disease epidemics, not everyone becomes infected. In the case of narrative epidemics, the people who miss the epidemic may tell you that there was no such important popular narrative. But in a historic epidemic, for most people the narrative will be fundamental to their reasons for doing, or not doing, things that affect the economy.
Just like the economic theories in Figure 3. They then recede unless they get renewed. Frequency of Appearance of Four Economic Theories, — The figure shows four important models: the IS-LM model Hicks, , the multiplier-accelerator model Samuelson, , the overlapping generations model Samuelson, , and the real business cycle model Kydland and Prescott, All four show hump-shaped patterns through time.
Source: Google Ngrams, no smoothing. These people then spend much of their additional income, which in turn generates income for other people who sell to them or work for companies that sell to them. The Keynesian theory can be tweaked to add some investment dynamics, as Paul Samuelson showed in with his multiplier-accelerator model, thus creating hump-shaped responses in national income as a result of an economic stimulus.
These hump-shaped responses resemble the epidemic curves we have seen. We can view the Keynes-Samuelson model as an epidemic model of sorts, where the contagious element is income. However, it is not enough to think solely in terms of mechanical, multiple rounds of expenditure. We must think of multiple rounds of expansion of economic narratives, and of the ideas and feelings embodied in them. Constellations and Confluences of Narratives Just as the world experiences co-epidemics of diseases, where two or more diseases interact positively with each other, we also see co-epidemics of narratives in which the narratives are perceived as sharing a common theme, such as case studies that illuminate a political argument, creating a picture in the mind that is hard to see if one focuses on just one of the narratives.
In other words, large-scale economic narratives are often composed of a constellation of many smaller narratives. Each smaller narrative may suggest a part of a larger story, but we need to see the full constellation to discern the full theme. The analogy to constellations should be clarified. Astronomical constellations, such as Cygnus the Swan, are chance alignments of stars, but humans interpret them in a way that seems natural to the human mind—in this case, as a swan.
Sometimes humans co-opt constellations for certain purposes. For example, Christians have renamed Cygnus as the Northern Cross to put one of their symbols in the sky. They also paired it with another constellation, the Southern Cross, for people living in the Southern Hemisphere. Other groups and cultures have different narratives with other motivations.
Narratives appear in constellations partly because their credibility relies on a set of other narratives that are currently extant. That is, they sound plausible and interesting in the context of the other narratives. The storyteller does not need to refute the other narratives to set the stage for the current one.
Also, the narrative may be based on certain assumed facts that the teller and the listener do not know how to test. Some narratives are contagious because they seem to offer a confirming fact. We can say with some accuracy that most people put on a show of their own knowledgeability and try to conceal their ignorance of millions of facts.
Some narrative constellations may at their peak infect only a small fraction of the population, but if that fraction of the population curtails its spending substantially, the narrative may matter a lot. In addition to a constellation of narratives, there is a confluence of narratives that may help drive economic events.
By a confluence, I mean a group of narratives that are not viewed as particularly associated with one another but that have similar economic effects at a point in time and so may explain an exceptionally large economic event. For example, in my book Irrational Exuberance, I listed a dozen precipitating factors, or narratives, that happened to occur together around to create the most elevated stock market in the United States ever, soon to be followed by a crash.
The list, in brief, comprised the World Wide Web, the triumph of capitalism, business success stories, Republican dominance, baby boomers retiring, business media expansion, optimistic analysts, new retirement plans, mutual funds, decline of inflation, expanding volume of trade, and rising culture of gambling. If we want to know why an unusually large economic event happened, we need to list the seemingly unrelated narratives that all happened to be going viral at around the same time and affecting the economy in the same direction.
It is far more likely that big economic events are not explainable in such satisfying terms. Instead, explaining those events requires making a list of economic narratives that itself cannot be described as a simple story or a contagious narrative. In part III of this book, we focus on some of the brighter stars in the narrative constellations, those that are significant enough to contribute substantially to changes in economic motivations.
We cannot yet link these constellations precisely to severe economic events. But even with partial views of the constellations and confluences, we are making progress toward understanding the events. We also have no more than a partial view of the forces that make some narratives into epidemics. It is difficult to state accurately or to quantify the reason a few economic narratives go viral while most fail to do so.
The answer lies in a human element that interacts with economic circumstances. Beyond some simple and predictable regularities, a network of human minds sometimes acts almost like a random number generator in selecting which narratives go viral. The apparent randomness in outcomes has to do with randomness in the mutation of stories to more contagious forms, and with moments of our individual lives and attentions, that can lead to a sudden climax of public attention to specific narratives.
We routinely find ourselves puzzling years later over the reasons for the success of popular narratives in history and for their economic consequences. The Spontaneity of Narratives in Human Thinking and Actions At the beginning of the twentieth century, scholars from a wide array of disciplines began to think that narratives, stories that seem to have entertainment value only, are central to human thinking and motivation.
For example, in the existentialist philosopher Jean-Paul Sartre wrote, A man is always a teller of tales, he lives surrounded by his stories and the stories of others, he sees everything that happens to him through them; and he tries to live his life as if he were recounting it. When we are asleep at night, narratives appear to us in the form of dreams. We do not dream of equations or geometric figures without some human element.
Neuroscientists have described dreaming, which involves characters, settings, and a hierarchical event structure, as based on a storytelling instinct. The sit-in story emerged from a single story about a February 1, , protest involving four students from Greensboro Agricultural and Technical College. The story revolved around polite young black people who ignored orders to leave the lunch counter where blacks were not served.
The young people sat patiently, waiting to be served, until the restaurant closed, and they returned the next day with more young people. The story went viral, through word of mouth and through news media attention, and within weeks the sit-ins spread throughout much of the United States. Activists tried to promulgate the story, but they were not in tight control of the social movement, which was largely viral. The word sit-in, coined in , was a true epidemic, with a hump-shaped curve resembling the hump-shaped pattern through time that we see in disease epidemics see Figure A.
Use of the term sit-in, as revealed by Google Ngrams, grew until , ten years later. In the interim, the movement spawned the word teach-in, which had a similar epidemic curve, though less intense and fading earlier. Tom is separated from his wife and children and sold to a vicious slave owner, Simon Legree, who beats him mercilessly for refusing orders to beat another slave.
The book contains some highly evocative scenes, including one of a slave mother, Eliza, fleeing with her four-year-old son after she is told that he will be sold. The Civil War began in , a historic event with enormous human and economic significance. Anthropologist Donald E.
Indeed, some have suggested that stories distinguish humans from animals, and even that our species be called Homo narrans Fisher, , Homo narrator Gould, , or Homo narrativus Ferrand and Weil, Might this description be more accurate than Homo sapiens i. It is more flattering to think of ourselves as Homo sapiens, but not necessarily more accurate. In ancient Greece, the philosopher Plato appreciated the importance of narratives; he wrote his philosophy in the form of fictional dialogues featuring the celebrity Socrates.
The narrative force helps to explain what makes his work still popular today. In his dialogue Republic, written around BCE, Plato has a character argue that the government should censor popular stories. Talking with Adeimantus, Socrates says: I do not say that these horrible stories may not have a use of some kind; but there is a danger that the nerves of our guardians may be rendered too excitable and effeminate by them. How is it that other animals learn fundamental survival skills, such as fearing specific predators?
Experiments have shown that monkeys are genetically predisposed to fear snakes, and birds are genetically predisposed to be afraid of hawks. Moreover, experiments have shown that monkeys and birds acquire fear when they observe others attack their own species. They also acquire fear, even lasting fear, when they observe circumstances that arouse fear among others in their group even if no attack occurs. If the narrative is strong enough to generate a salient emotional response, it can produce a strong reaction, such as an instinctual fight-or-flight response.
Also universal are norms of polite conversations that facilitate the transmission of narratives. Basic politeness involves simple actions like looking at the person with whom one is speaking, and giving some indication of hello at the beginning of the conversation and good-bye at the end.
These norms tend to flatter the other party. They are so engrained that, as experiments have shown, people are somewhat polite when conversing with computers too. It seems that the human mind strives to reach an enduring understanding of events by forming them into a narrative that is embedded in social interactions. It has also been suggested that our species be called Homo musicus, man the musician, because composed music is found in all human cultures, but in no nonhuman species. In extreme cases, they may focus on events as evidence of an imagined conspiracy.
Of course, it is rational for people to be alert to conspiracies, because history is filled with real conspiracies. But the human mind seems to have a built- in interest in conspiracies, a tendency to form a personal identity and a loyalty to friends based on the desire to protect oneself from the perceived plots of others. This disposition appears to be related to human patterns of reciprocity and of vengeance against presumed enemies, two tendencies that have been found relevant to economic behavior in terms of willingness to give in bargaining or eagerness to punish unfair behavior, even if doing so means economic loss.
Narratives generally take the form of some recounting of events, whether actual or fictional, though often the specific events described are little more than bits of color brightening a concept and making it more contagious. The human tendency to form simple narratives around even the most complex chains of events infects even the most analytical minds. Garry Kasparov, international chess grandmaster, commented from his own experience: The biggest problem was that even the players would fall into the trap of seeing each game of chess as a story, a coherent narrative with a beginning and a middle and a finish, with a few twists and turns along the way.
And, of course, a moral at the end of the story. But we have no such planner. We do have people who can be selfish, altruistic, or both. These people can be influenced by stories. Schank and Robert P. Abelson, narratives may be seen as nothing more than scripts.
Fiduciaries and experts do not have the right to act on their own judgment. We can debate whether such behavior is rational. In one sense it is rational to copy the behavior of apparently successful people, even if one does not see any logic in the behavior. Those being copied might have mysterious or unobserved reasons for such behavior, and their success suggests they have at least stumbled onto an advantageous behavior.
But traditional economic theory does not model this kind of rationality. On the contrary, following scripts set by others often looks like quite stupid behavior. People often fail to notice ideas if those ideas are not part of a script or are not packaged well enough. In my book The New Financial Order, I argued that some obvious financial inventions have not been adopted anywhere, and I asked: Why?
As an analogy, I gave the example of wheeled suitcases. An earlier version of the wheeled suitcase by Bernard Sadow in had achieved only limited acceptance. The traveler pulled it along by a leather strap, and it worked moderately well, though not perfectly because it tended to flop over sideways.
Still, it was a big improvement over nonwheeled suitcases. Sadow had great difficulty getting his wheeled suitcase accepted in the market. Nobody was interested, but why? The idea was good, and today almost every traveler owns Rollaboards or their descendants. Years after The New Financial Order was published, I received an email from a former patent examiner who told me of a wheeled trunk patent in , and it looks like much the same idea.
I later found a article by John Allan May, who recounted his efforts to manufacture and sell a wheeled suitcase starting in May wrote: And they laughed. I was very serious about it. But they laughed, the whole lot of them. When I spoke to any group about the further application of the theory of wheels they would express themselves as vastly entertained in a kind of soporific way.
Why not make full use of the wheel? My wife tired of hearing about it back in The only man who ever took me seriously was an inventor who lived for a time a couple of houses away. The trouble was, nobody took him seriously. With its built-in wheels and retractable handle you can roll it through the airport, aboard the plane and down the aisle.
Experimental Evidence on Virality Experimental evidence shows that the success of individual creative works depends on how people assess the reactions of others who are observing the work. In one experiment,23 sociologist Matthew J. The market included an array of songs that customers could listen to, rate, and, if they chose, download. Unknown bands performed all the songs, and none of the listeners had ever heard any of the songs before taking part in the experiment.
This artificial market simulated real online markets in that subjects never communicated with one another except that they could observe the popularity of songs. In the extreme shared condition, the computer screen always showed the songs in rank order in terms of popularity measured by downloads. It seems logical to conclude that something about the random initial choices in the shared worlds got amplified as time went on.
This research may be taken as experimental confirmation that random small beginnings can lead to big epidemics. The lesson is that history, including economic history, is not the logically ordered sequence of events that is presented by subsequent narratives that try to make sense of it or try to achieve public consensus. Major things happen because of seemingly irrelevant mutations in narratives that have slightly higher contagion rates, slightly lower forgetting rates, or first-mover effects that give one set of competing narratives a head start.
These random events can feed back into bigger and more pervasive narrative constellations, as we will see in the next chapter, which examines the narrative constellations associated with the famous or infamous Laffer curve. Economics has its own one-hit wonders, including the now-infamous Laffer curve. Examining how this economic narrative went viral provides further insight into how economic narratives lead to real-world results.
The Laffer Curve and the Infamous Napkin The Laffer curve is a diagram famously used by economist Art Laffer at a dinner in to justify the government cutting taxes without cutting expenditures, which would please many voters, if the justification were valid.
The curve, which takes an inverted U-shape, relates national income tax revenue to the rate at which income is taxed, taking account of the fact that higher tax rates make people work less, thus decreasing national income.
The concept sounds like something that most people would find dull and boring. But, somehow, the Laffer curve went viral Figure 5. The Laffer curve described in the narratives that are tallied in the figure owes much of its contagion to the fact that it was used to justify major tax cuts for people with higher incomes.
Both were conservatives whose campaigns promised to cut taxes. The Laffer curve narrative has a striking punch line that comes as a surprise but usually does not provoke any laughter. The narrative goes like this: What is the relationship between the rate at which income is taxed and the amount of tax revenue collected by the government?
Well, it is very clear that if the tax rate is zero, zero tax revenue will be collected. When you connect the points, you have the Laffer curve. And here is the punch line: because the curve has the shape of an inverted U, there are always two tax rates that will collect a given amount of tax revenue. That conclusion is a surprise, for hardly anyone talks of a pair of tax rates for a given revenue.
Obviously, to fund the government, it is better to apply the lower of the two tax rates, not the higher. The notion that taxes might reduce the incentive to earn income and create jobs was hardly new. Adam Smith expressed the idea in the eighteenth century. But then the Mellon name began to fade outside of Carnegie-Mellon University , and the narrative lost its momentum. The story of the Laffer curve did not go viral in , the reputed year that Laffer first introduced it.
The National Museum of American History now owns the napkin. Sadly, such artifacts rarely materialize, and some of the best stories turn out to be apocryphal. However, sometimes you strike gold. It was my luck to beat the odds and collect an incredible story about American business history, a story of political change, economic revolution, and social impact—it was the real deal.
Visual Aids Go Viral Why did the napkin story go viral? Good storytelling seems at least partially responsible. After the Wanniski story exploded, Laffer said that he could hardly remember the event, which had taken place four years earlier.
The key idea, as Wanniski presented it, is indeed punchy. It may seem absurd to conclude that a story element of a drawing on a napkin helped make the story go viral. Rather, a small detail like a graph drawn on a napkin might have raised the contagion rate at the beginning of the narrative above the forgetting rate. The Laffer curve embodies a notion of economic efficiency easy enough for anyone to understand. Wanniski suggested, without any data, that we were on the inefficient side of the Laffer curve.
The drawing of the Laffer curve seemed to suggest that cutting taxes would produce a huge windfall in national income. To most quantitatively inclined people unfamiliar with economics, this explanation of economic inefficiency was a striking concept, contagious enough to go viral, even though economists protested that the United States was not actually on the inefficient declining side of the Laffer curve.
In the end, the Laffer curve napkin story may have gone viral because of the sense of urgency and epiphany conveyed by the story: the idea was so striking, so important, that an economics professor wanted to do something out of place at a fancy restaurant to make government officials see its brilliance.
The visual detail of the napkin may have lowered the speed at which people forgot the narrative, which could have helped the epidemic penetrate a large fraction of the population. There is a lesson to be learned here for those who want their stories to go viral: when authors want their audience to remember a story, they should suggest striking visual images. In ancient Rome, the senator Cicero advocated the use of this strategy, quoting the scholar Simonides: For Simonides, or whoever else invented the art, wisely saw, that those things are the most strongly fixed in our minds, which are communicated to them, and imprinted upon them, by the senses; that of all the senses that of seeing is the most acute; and that, accordingly, those things are most easily retained in our minds which we have received from the hearing or the understanding, if they are also recommended to the imagination by means of the mental eye.
Make it a silly or impossible image. As the narrative went, Rubik was a creative Hungarian sculptor and architect whose puzzle captivated the scientific and mathematics community worldwide because it fostered a narrative that it represented some interesting mathematical principles. Scientific American magazine did a cover story on the cube in its March issue, with the lead article by Douglas R. He described connections to quantum mechanics and the rules for combining the subatomic particles called quarks.
Both show similar hump-shaped paths through time. Other narratives in the same constellation with the Laffer curve sprang up around the same time. The terms leveraged buyouts and corporate raiders also went viral in the s, often in admiring stories about companies that responded well to true incentives and that produced high profits as a result.
Maximize suggests intelligence, science, calculus. Shareholder reminds the listener that there are people whose money started the whole enterprise, and who may sometimes be forgotten. Value sounds better, more idealistic, than wealth or profit. Use of the three words together as a phrase is an invention of the s, used to tell stories of corporate raiders and their success.
The term maximize shareholder value is a contagious justification for aggressiveness and the pursuit of wealth, and the narratives that exploited the term are most certainly economically significant. If the Laffer curve epidemic had even a minor effect on these changes, then it must have had a tremendous impact on output and prices. For these reasons, the Laffer curve is well remembered to this day, but it was only one part of the narrative constellation now known as supply-side economics, which holds that governments can increase economic growth by decreasing regulation and lowering taxes.
The term supply-side economics went viral around the same time the Laffer curve did. The Laffer curve contributed to the impact of the many supply-side narratives because it was a particularly powerful narrative. People who worked more ended up with less after-tax income. We can find evidence for the existence of this narrative constellation by searching digitized newspapers for the term highest tax bracket.
Since the s, the epidemic of stories about the highest tax bracket has continued to grow. Attention to the highest tax brackets naturally drew attention to the lowest tax brackets and to effectively negative tax rates for the poorest, who were now judged in a less sympathetic light.
In the United States, the term welfare mother refers to an unmarried woman and her children who are supported by unwilling male taxpayers. Use of the term exploded from zero in to a peak in the early s, after President Lyndon Johnson announced his Great Society plan to eliminate poverty.
Property taxes came in for strong criticism too. In the s, the news media began to notice a public opinion change strongly in evidence for at least another decade after that associated not with a celebrity but with a California referendum called Proposition Passage of the proposition led to a constitutional amendment in California that put a firm limit on property tax increases.
But it has California state and local officials shriven with fear and perhaps guilt … Proposition 13 is spawning imitators in half the states of the Union. Related stories railed against government inefficiency and corruption in the spending of tax revenue. But the taxpayer revolt came and went quickly, in the few years around In the background was the rise of a free-market, laissez-faire narrative in the second half of the twentieth century in Anglo-Saxon countries.
Its readership was limited in the s, but the novel gradually rose to ever-greater prominence through the rest of the twentieth century. The influence of Rand and her novels has continued to grow since her death in , unlike the taxpayer revolt story, which was contagious only briefly. It seems that the novels were a slower but ultimately larger epidemic. A bit earlier, the phrase stimulate the economy had emerged in the late s, and its use grew rapidly from to , suggesting that tax cuts for higher-income people might serve as an energizer, freeing the supposedly superior people to contribute to society.
If it keeps moving, regulate it. And if it stops moving, subsidize it. But it needed a celebrity to make it truly contagious, and Ronald Reagan was the celebrity who did just that. Note the poetic quality of the three elements of the quip, but improved upon between Trohan and Reagan. In short, it seems likely that narratives like the Laffer curve and other supply-side stories touched off an intense public mandate for tax cutting. We might argue, too, that the constellation of narratives about tax cutting and smaller government propelled a social movement: entrepreneurship.
Reagan then told his current favorite, about a Russian who wants to buy a car. A Matter of Delivery. The man goes to the official agency, puts down his money and is told that he can take delivery of his automobile in exactly 10 years. We need to understand their organizing force.
The storage points for all these narratives is the human brain, with its prodigious memory capacity. In the next chapter, we use neuroscience to consider the structure of this repository. The Impulse to Convey Stories In , brain surgeon Wilder Penfield implanted electrodes into the brains of human subjects while performing brain surgery, undertaken for medical reasons on wide-awake patients, under only local anesthesia because the brain itself has no pain receptors.
Each time she heard an orchestra playing the same piece of music. It apparently began at the same point and went on from verse to chorus. Seeing the electrical stimulator box, from where she lay under the surgical coverings, she thought it was a gramophone that someone was turning on from time to time. I was talking to a man. The man was trying to reassure me not to worry about the book. After the withdrawal of the electrode, she was asked to explain.
For our purposes, his results indicate the extent to which the human brain structure appears to embody some of the traits that we think of as exclusively human: the propensity to make music and the propensity to tell stories as sequences of events, stories that trigger emotions. Modern neuroscience is trying to pin down the determinants of the human impulse to tell stories. For example, a team from Emily B. Paul J.
Neurological Responses to Stories Evoking Fear News media and popular discussions have long described financial crises as panics created by a spate of sudden economic failures following a period of excessive complacency about economic risks. It may seem like journalistic hype to use charged words such as panic, which conjures images of a stampeding mob trying to escape a sudden physical danger, and complacency, which suggests a sort of smug stupor.
Yet people mostly seem perfectly rational during such financial events, which take place over months and years of largely normal living, and they tend to present themselves as sorting through the facts. But are panic and complacency really so far off the mark? Both words describe mental states that must be supported through neurological structures. We need to study those structures to determine whether there is any common neurology between financial panics and other panics, between financial complacency and other types of complacency.
Consider an example that is current during the writing of this book: the pattern of increasing risk taking by banks as the tenth anniversary of the —9 world financial crisis approached. In , the Federal Deposit Insurance Corporation issued a report expressing concern that US banks, in a reach for yield, were taking excessive risks by extending the maturity of their investments.
For nearly ten years after the financial crisis, interest rates had been very low, though higher at longer maturities. Ultimately, the banks decided to take the risk, but how did they form their expectations of future interest rates? No expert has a proven record of forecasting interest rates years into the future.
No one can tell a banker how long to wait out a period of low interest rates or guarantee that the low rates will go on forever. All that bankers have are fading memories of narratives of other historical periods when interest rates rose dramatically, leading droves of depositors to run to their banks and withdraw their money.
Those stories seem less relevant when interest rates have been low for ten years, but there is no way to quantify how much less relevant. The fact that dogs and rodents today have some of these same fear- management brain structures is evidence for their common Mesozoic origins.
Fear is a normal emotion for all mammals and higher animals, and it is supported by brain structures. The extinction of fear is a process that must take place over time to release the fear after the danger has passed. Scientists first observed the action of these brain structures indirectly. In , Ivan P. Pavlov, a Russian physiologist, reported his research on dogs. If dogs were repeatedly given a dose of acid on their tongue as a metronome clicked in the background, then later the sound of the metronome alone, without the acid, would induce the same involuntary reactions as if acid had been applied.
Later, the brain structures involved in such reactions were discovered. Not all of the neurons reduce their firing, keeping a residual fear intact. Neuroscientists have concluded: Collectively, there is much evidence suggesting that a distinct neural circuitry involving interactions between the amygdala, vmPFC [ventromedial prefrontal cortex], and hippocampus underlies the ability to extinguish fear, and that this circuitry is preserved across evolution.
In humans, thickness of the ventromedial prefrontal cortex is correlated with success in fear extinction. A mental state akin to PTSD may afflict a whole population at times. But what exists in the Imperium is naked fear.
Such fear appeared to them as a personal situation, tragic in view of the indifference and callousness of their environment. But if all one hundred thousand people live in daily fear, they give off a collective aura that hangs over the city like a heavy cloud. The decline in fear may reflect a gradual process of fear extinction that may be reversed if the narrative experiences a dramatic new development or mutation. Just as it is difficult or impossible to predict which motion picture will be a box office hit, it is difficult to predict which narrative will eventually have economic impact.
Contagion was increased by communications at bazaars, religious festivals and fairs, as well as casual encounters. The praeco announced news and stories to the crowd, read advertisements, and handled auctions. Rumor is the ancient Latin word for contagious narrative. The polymath David Hume —76 wrote in When any causes beget a particular inclination or passion, at a certain time and among a certain people, though many individuals may escape the contagion, and be ruled by passions peculiar to themselves; yet the multitude will certainly be seized by the common affection, and be governed by it in all their actions.
Conversation among people of every rank, I have remarked for some months past to run in one invariable channel: and the hackneyed topicks of discourse to be constantly introduced in the same precise order, with admirable uniformity. Benevolent enquiries respecting health, and ingenious observations on the weather, according to the laudable custom of our ancestors, from time immemorial lead the van.
As soon as these curious and important articles are discussed; the muscles of the face being previously worked up into a mixt passion of distress and resentment, tempered with a suitable proportion of political sagacity; succeeds the wonderful discovery aforesaid, THERE IS NO MONEY; which is instantly repeated by each party, with every token of astonishment.
He thought it reasonable to assume based on his observations that a million people were saying it every twenty minutes during most of the daylight hours, and some were even sleep-talking it. Of Book Jackets and Company Logos Those who try to create viral narratives experiment, observe their successes and failures, and try to identify patterns that might suggest further avenues for creation. But the difference between a viral narrative and a nonviral narrative may depend on some aspect of the narrative that is not related to our enthusiasm for the narrative.
It may depend, for example, on something hard to observe directly, such as the ability to connect with other topics of conversation, or reminders in other narratives. The contagion rate is often natural, closely related to an event that launched an epidemic, but it is sometimes engineered by marketers. Their engineering may be almost invisible to us because it happens so frequently that we get used to it, and because we find it difficult to imagine all the thought and research that went into the design of marketing campaigns.
For example, consider the modern book jacket, the paper cover that publishers place over their hardcover books and that usually includes endorsements, eye-catching fonts, author photos, and colorful artwork. The modern book jacket was invented during the advertising and marketing revolution around the s, replacing some earlier plain-paper book jackets that were there merely to prevent the book from becoming shopworn.
It is important to note that the jacket looks like the work of the publisher, not the author, so it does not make the author look pandering or boastful. Book jackets permitted an immense step-up in contagion rates for books, despite their sometimes vulgar tone. It may be hard to understand the initial public resistance to book jackets at the time of their introduction.
Most people would never have seen the endorsements that were placed on the book jackets, and soon bookstores learned to place the latest book jackets on display in their shop windows to catch the attention of passersby on the sidewalk. The book jacket was a brilliant marketing innovation precisely because readers made the final decision: they could take the jacket off and throw it away, or they might leave it on and place the book on their coffee table, thus passing along its contagion to people who visited.
Once it became established that even dignified authors would allow their publishers to cover their books with a glitzy dust jacket, it became a permanent fixture. In fact, publishers who want to survive in a highly competitive business where others use book jackets have had no choice, for the book jacket is part of what George Akerlof and I called a phishing equilibrium.
In a competitive market in which competitors manipulate customers, and in which profit margins are competed away to normal levels, no one company can choose not to engage in similar manipulations. If they tried, they might be forced into bankruptcy. A phishing equilibrium with a certain acceptable level of dishonesty in narrative is therefore established.
In the case of the book cover, there has developed an art of book jackets that sometimes have significant value. A recent example occurred in the United States in during a total eclipse of the sun that found many people traveling within the country to see the eclipse in its totality. The popular news media were relentless in covering the story, because, no doubt, they recognized its contagion as an experience shared by so many people. Some reporting took on a mystic-patriotic tone, as if God had granted this extremely rare event to the United States.
In fact, there was nothing genuinely newsworthy about the eclipse; eclipses have been studied and understood for centuries. We also see engineered contagion in company logos on clothing and shoes, especially athletic or work clothing and shoes.
The word logo, meaning a symbol representing a company or product line, dates back only to the s. An example is the Lacoste clothing line, which displays its crocodile logo on its sportswear, casual clothing, and other products.
Today, Lacoste the tennis star is mostly forgotten. Still the memory continues, and the logo persists. Those who do not reflect on the imperatives of marketing may imagine that people wear logo-branded clothing because they want to associate themselves with a prestigious clothing designer.
But perhaps logo marketing works because it increases contagion. Customers may absently reach for the logo product because it is familiar and safe, and because so many others are wearing clothes with the same logo. The construction of narratives by news media, promoters, and marketers can also help lower the forgetting rate. Narratives can be associated with symbols or rituals that remind people of basic elements of the narrative.
A symbol can be incorporated into building architecture, letterheads, email messages, and a million other items, and a narrative can be incorporated into regular rituals, such as traditional parades on national holidays. Experts do not fully understand the role of ritual and symbols in aiding memory, but they do understand that they are associated with success.
All these examples illustrate a fundamental error that people tend to make: phools think that the popularity of a story or of a brand is evidence of its quality and deep importance, when in fact it rarely is. On the contrary, growing evidence in recent years has shown that many consumers detest logos and aggressive marketing.
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Investing in One Lesson. Mark Skousen. Why are the smartest, most successful professionals so often failures when it comes to investing? Can stock prices really be so illogical that even doctors and lawyers can't figure them out? Ultimately, is it possible for anyone to decipher the financial markets? Fortunately, the answer is yes. In Investing In One Lesson , investment guru Mark Skousen clearly and convincingly reveals the reasons for the seemingly perverse, unpredictable nature of the stock market.
Drawing upon his decades of experience as an investment advisor, writer, and professor, Dr. Skousen explains in one spirited, easy-to-follow lesson why stock prices fluctuate with such apparent irrationality. Whats Your Business? Skousen explains in one spirited, easy-to-follow lesson why stock prices fluctuate with such apparent irrationality.
Lifting back the veil of perplexity and confusion that surrounds the workings of the stock market, Dr. Skousen's book concludes with a comprehensive but simple investment strategy to maximize your returns without having to dedicate countless hours to researching the market.
Skousen packs his book with entertaining personal and professional anecdotes illustrating his central point--that the business of investing is not the same as investing in a business. He offers investors a wide-ranging but accessible course on investing history, psychology, and strategy--all in one lesson.
Get A Copy. Hardcover , pages. More Details Original Title. Other Editions 8. All Editions Add a New Edition. Friend Reviews. To see what your friends thought of this book, please sign up. To ask other readers questions about Investing in One Lesson , please sign up. Be the first to ask a question about Investing in One Lesson. Lists with This Book. This book is not yet featured on Listopia. Add this book to your favorite list ».
Community Reviews. Showing Average rating 3. Rating details. More filters. Sort order. Start your review of Investing in One Lesson. Jan 19, Jay rated it liked it Shelves: finance. Contrary to what the other reviewers are saying, the One Lesson isn't to buy dividend stocks although that's the bulk of his recommendations , it's that the market is not the economy and that economy is not the market. I enjoyed this book quite a bit.
It's a fairly simple and cogent introduction to investing. The reason for my 3-star rather than 4-star review is that for an Austrian Economist, there's hardly any Austrian Economics in the book. He does mention the business cycle, easy monetary p Contrary to what the other reviewers are saying, the One Lesson isn't to buy dividend stocks although that's the bulk of his recommendations , it's that the market is not the economy and that economy is not the market. He does mention the business cycle, easy monetary policy, etc, but the Austrians are underrepresented in financial economics and I was hoping to see some muscle flexing here.
Jun 03, Kate rated it liked it Shelves: non-fiction. The one lesson? Buy dividend stocks. Easy and interesting read by a contrarian investor. Jun 10, Keith Brooks rated it really liked it. What Hazlitt did for economics, Skousen attempts for investing.
Relies heavily on Jeremy Siegel's work. Mar 14, Osh rated it really liked it Shelves: investment-and-financial-planning. Mar 19, Sean rated it really liked it. Listened to audiobook while auditing things in our home. A few take aways. Dividends don't lie. Loosing it all is the beginning of learning.
Many others that I've heard from other resources; a nice quick refresher Listened to audiobook while auditing things in our home. Many others that I've heard from other resources; a nice quick refresher Jan 02, Bwaye rated it it was amazing. I would have to say! Yes, it is simple and it is not a get rich book. But, the ideas in this book are sound and have been tested over time.
I can say when I was an early investor I followed these simple investing steps. I would say this is a great starter for anyone investing. I only have one update and suggest that if you read this book, please understand the times you are in. This was talking about a then time before ETFs or Cryptocurrency it did touch mutual funds, bonds, and gold. You can fi I would have to say! You can find ETFs that are value driven and provide annual dividends. With Cryptocurrency, I would say find staking rewards, APY like a saving or CD as well as looking for something that will allow you to make secure loans to platforms or businesses not people.
It does go into money markets which is good. This is more for a methodical investor, who wants to have a savings account earn intertest cash , money market make interest cash , cd make interest, cheap small cap dividend stock make dividends cash. If your looking for a other strategies or get quick day trading try books on Poker. This is income investing If you want to invest, read this book. The one lesson is very easy and simple and straightforward, and it is absolutely sobering.
The book talks about economic theory as well as the nuances of investing in stocks, gold or even digital coins if you think about it , foreign currencies, bonds, real-estate, or what-have-you, and his lessons are always on point. I really advise this book for anyone who wants to start on investing. Especially that it is really fun to read, and it explains these seemin If you want to invest, read this book.
Especially that it is really fun to read, and it explains these seemingly esoteric and tough concepts in ways everyone can understand. It explains the differences between long-term and short-term investments, and some pearl of wisdoms that have proven very useful today. Mar 01, Matthew rated it really liked it. I'm no expert in investing - far from it. But Skousen does a nice job of walking the reader through a number of investing options and outlining the associated risks. The bottom line is that he recommends stocks that pay dividends.
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