Global Economic News Digest

This Is the Kind of Storytelling That Economics Needs

07 sep 2022
author: Peter Coy
source: The New York Times

Economists ought to read more science fiction. All that fun, futuristic stuff: phasers, lightsabers, replicants, intergalactic federations, extraterrestrial beings in hovercrafts.

Please don’t write in with the inevitable joke: “But economics is science fiction!”

One reason economists should read more science fiction is that sci-fi opens the mind to other ways the world could be. That’s valuable in general, but sci-fi is especially useful for economists, because it often delves into topics that occupy them, pushing those ideas to their logical extremes.

For example: What if money went away? What if corporations became more powerful than governments? How would we reorganize society if no one needed to work?

This isn’t idle speculation. Strange things happen far more often than we like to think. Reading sci-fi sensitizes us to the possibility of radical change. Society needs such sensitivity in economists, among others. The 9/11 commission wrote in Chapter 11 of its report that it is “crucial to find a way of routinizing, even bureaucratizing, the exercise of imagination.”

But sci-fi doesn’t just brace people for extreme change; it can also encourage them to bring it about. Science fiction is “a political resource, as it empowers the critic and the radical to see the present as amenable to conscious transformation,” William Davies, a professor at Goldsmiths, University of London, wrote in a 2018 book that he edited, “Economic Science Fictions.”

Consider the corporation. It’s a failure of the imagination to take today’s corporate form as a given. A corporation is an entity with (1) potentially infinite longevity that has (2) “corporate personhood,” according to the Supreme Court, and (3) protects its owners from legal liability for its misbehavior. It’s the kind of odd arrangement you might expect to find on Kurt Vonnegut’s Tralfamadore.

“Economists are notoriously unimaginative people,” Ha-Joon Chang, an economist at the University of Cambridge, wrote in the first chapter of Davies’s book. Many economists, he wrote, “believe in the fiction that they are practicing ‘science’’’ and cling to the false notion that “progress in science (and thus technology) is going to — or at least can — solve virtually all economic problems.”

Science fiction teaches otherwise. Chang wrote for The Guardian in 2015 that his life was changed by Douglas Adams’s “The Hitchhiker’s Guide to the Galaxy,” a comic sci-fi novel from 1979 that, as he described it, “deployed off-the-wall humor and industrial-grade satire to discuss serious issues.”

My colleague Paul Krugman, a Nobel laureate economist, is famous in sci-fi circles for a paper he wrote in 1978 as a struggling assistant professor, “The Theory of Interstellar Trade,” in which he considered how transporting goods close to the speed of light might affect interest rates on those goods. Throwing shade on others in his profession, Krugman wrote: “It should be noted that, while the subject of this paper is silly, the analysis actually does make sense. This paper, then, is a serious analysis of a ridiculous subject, which is of course the opposite of what is usual in economics.”

Another reason economists should read more science fiction is that imagining the future is what all of us do daily in less fanciful analyses of possible costs and benefits. Life is about making choices whose results aren’t fully knowable. Should you have dessert? Should you try to beat the light? Should you talk back to your boss? In each case you have to spin out the likely consequences of doing one thing or another. In envisioning worlds that may never exist, you’re writing your own little economic sci-fi stories many times a day.

In the same way, central bankers such as Jerome Powell, the Federal Reserve chair, don’t just raise and lower interest rates. They also tell stories. “Forward guidance,” which I wrote about last month, is all about steering the economy by creating a vision of the future that is convincing to financial market participants and members of the general public. That’s science fiction, minus the death rays. Robert Shiller, a Nobel laureate economist at Yale, wrote a whole book called “Narrative Economics: How Stories Go Viral and Drive Major Economic Events.”

If economists care about life as it’s actually lived, rather than the bloodless world of rational expectations, they need to pay attention to the stories people are being told about what’s to come. “Much of history revolves around this question: How does one convince millions of people to believe particular stories about gods, or nations, or limited liabilities companies?” Yuval Noah Harari wrote in “Sapiens: A Brief History of Humankind.”

Successful storytelling “enables millions of strangers to cooperate and work towards common goals,” Harari continued. “Just try to imagine how difficult it would have been to create states, or churches, or legal systems if we could speak only about things that really exist, such as rivers, trees and lions.”

“Fictional expectations” is a term for this kind of storytelling, introduced by Jens Beckert, a professor at the Max Planck Institute for the Study of Societies in Cologne, Germany. Fictional expectations are “a fundamental force fueling the dynamism of modern capitalist economies,” he wrote in a 2016 book, “Imagined Futures.”

So, yeah, I guess you could say economics is science fiction.

One caveat: Storytelling is often so persuasive that it can blind us to facts that don’t fit a narrative. That’s not a problem for sci-fi authors, but it’s a big problem for economists, who should be observing the power of narrative but not exercising that power to sway opinion. (Leave that to the politicians, central bankers and, truth be told, journalists.)

Some scholars suggest that this kind of narrative policing is critical to assessing economic claims. “As a literary scholar researching economics and its history, I have found that being aware of the similarities between economists and novelists helps us to better evaluate the claims they make,” Carolin Benack, a doctoral candidate at Duke University, wrote in an essay for The Conversation in 2020. “Both are telling stories. Understanding that empowers us to judge the credibility of what they’re saying for ourselves.”

The truth is out there."