Pointing out the good and the extraordinary
If you are a teenager today, you may take for granted the exceptional technical and medical progress made over the last 50 years. The long period of post-war peace has led to more economic growth, more social equality, more access to (better) education and much better odds for any of us to fight off disease and live longer. If 50 years sounds a few years too many, you only have to look 15 years back – maybe to the year you were born - to see what incredible advances have been made since then; from the iPhone and the metaverse to electric cars and vaccines against Covid (a disease that 50 years ago may have killed many more people); from quantum computers, virtual exercise and space travel to plant based beefburgers and fabrics made from food-waste. And last but not least, the longest bull-run in the US stock-market. The list is endless and enough to cheer anyone up.
But pessimism is so much more seductive
Pessimistic narratives, nevertheless, seem to win the day. Optimism, on the other hand, is perceived as naïve, as not understanding risk and as not being serious. Pessimism just sounds smarter. Pessimism – in short – is intellectually more captivating. This is particularly relevant in the field of Economics: stories of impending economic decline, uncontrolled inflation or a potential stock market crash, are powerful forces in economies, many of which today are largely based on retail consumption and hence on how confident you and I feel about spending money. Pessimism paralyses, it stops us in our tracks.
The effect of stories on our economic behaviour is called ‘narrative economics’, a term coined by Robert Shiller, a professor of Economics at Yale University. Narrative economics aim to measure the impact of stories on the level of consumer confidence. That stories impact us is clear form the simple fact that – at this point in time - despite a bumper GDP growth in 2021, our economic confidence is low.