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Narrative Economics [pdf] (yale.edu)
43 points by dnetesn on Jan 29, 2017 | hide | past | web | favorite | 4 comments



+1. I don't think any popular "economic narrative" has ever truly matched an event -- these events are rarely so simple. The original Great Depression narrative (which is unfortunately taught to kids in school) is that it was brought on by the instability of unadulterated, speculative capitalism, and saved by the New Deal. What a travesty! Hoover and FDR managed to protract a recession that was at least partially caused by tight, at the time experimental monetary policy by the Federal Reserve, into a decade-long economic catastrophe, unparalleled in modern history (with help from a drought). But even the Monetarist argument and Austrian-economic (inflationary policy to keep commodities constant) explanation are overly simple. In reality, economies are chaotic systems that were likely affected by elements of all three narratives (perhaps the least so with the first, most prevalent narrative).

The same thing is happening with the "Great Recession," and what is about to be "The Greater Recession 2." There are a significant number of people, like Bernie Sanders, who believe all the banks acted in concert and became 'more greedy' than usual somehow, giving out cheap loans for speculative profit. In reality, there were two primary factors that created the boom and bust: Fannie Mae's loan buyback program and low Federal reserve interest rates. Great write-up here: https://admin.fee.org/files/doclib/houseunclesambuiltbooklet...

We don't have the loan buyback program anymore, but we've had unprecedentedly low interest rates for the last eight years, so I'm not optimistic about this next crash. Definition of "kicking the can down the road" economic policy.


The really good stuff starts at page 42, though it absolutely amuses me to see Robert Shiller write about internet memes (in a lit review, but still).


Robert Shiller (who authored this review) has an excellent Coursera course called "Financial Markets" [0]. It gives a broad overview of many important facets of the economy.

[0] https://www.coursera.org/learn/financial-markets


If you liked this, check out Shiller's book Irrational Exuberance. Released near the peak of the dot-com bubble, it covers a lot of related subjects.




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