“The Only Ones Who Don’t Seem To Understand Are The Economists,” Said The Economist
Presenting the latest weekly anecdote from Eric Peters, CIO of One River Asset Management
“The only ones who don’t seem to understand are the economists,” said the economist, a Nobel Laureate.
He was discussing the importance of narrative in society. “Economists talk about interest rates, price-to-earnings ratios, and obscure formulas as if we’ve arrived from a different planet. These things don’t drive people. Stories drive people.” Of course, economists may not know how to tell a good bedtime story, but they sure can put a room filled with middle-aged nerds to sleep.
Which may explain why sociologists, anthropologists, linguists and just about every other scientific group studies the importance of narrative, but not economists.
“I’m particularly intrigued by something coming out of the medical field called Mathematical Epidemiology,” he said, using a really complex term to describe the spread of infectious disease. “Scientists are becoming aware of the spread of thought viruses, memes, idea-microbes. It turns out they’re contagious just like diseases.”
The reason that ‘going viral’ is creeping into our language is that it’s become our reality. It’s how fake news spreads, infecting us all.
“The models have two inputs; contagion rate and recovery rate. Epidemics burn themselves out because people recover and become immune.”
Idea-epidemics follow a similar path. “Populism in the 1930s was an idea-epidemic that led to Fascism. The horrors of WWII sparked the spread of globalism, multi-nationalism, multi-culturalism. And these ideas appear now to have expended themselves,” he said, pivoting to The Donald.
“Trump is a story teller. He’s an example of narrative economics, the personification of a story.” And the economist paused, examining both hands.
“He might be bad or he might be good. He has no political experience. He talks openly, rejects political correctness. And he throws out theories that might even be right – we really just don’t know – because we’ve never heard them before.”
Which is today’s narrative.
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And, as an added bonus, two fables:
Fables: “Trump embodies the spirit of Mandeville,” said the economic historian, reciting his 18th century poem – The Fable of the Bees – which argued that successful societies spend lavishly. “Keynes said the same thing when he described the paradox of thrift. Perhaps Trump can convince people to spend again,” he continued.
“Roosevelt told us that the only thing to fear is fear itself,” he said, reciting FDR’s 1933 inaugural address, set in the midst of a profound banking crisis.
“But then again, that didn’t really work, America remained mired in depression.”
Fables II: “Then there’s Calvin Coolidge, who presided over the 1923-29 boom. He said the chief business of the American people is business,” continued the same economist.
“Coolidge cut taxes on the rich. Adopted policies broadly similar to Trump. Worked beautifully for him.” He left office just in time, the market crashed.
“There was Joe McCarthy,” he said. “A charismatic figure in the 1950s. The public found him amusing. They enjoyed his prosecution of Congress.”
But Joe drank his own Cool-Aide. “The public eventually turned sharply against him.”