Sun, Mar 23, 2014 - Page 9 News List

The global economy’s story risks

The impact of positive economy-related narratives can shape people’s confidence, thinking and behavior

By Robert Shiller

One example is the rapid advance in smartphones and tablet computers. Apple’s iPhone was launched in 2007 and Google’s Android phones in 2008, just as the crisis was beginning, but most of their growth has been since then.

Apple’s iPad was launched in 2010. Since then, these products have entered almost everyone’s consciousness; we see people using them everywhere — on the street and in hotel lobbies, restaurants and airports.

This ought to be a confidence-boosting story: Amazing technologies are emerging, sales are booming and entrepreneurship is alive and very well. Yet the confidence-boosting effect of the earlier real-estate boom was far more powerful, because it resonated directly with many more people. This time, in fact, the smartphone-tablet story is associated with a sense of foreboding, for the wealth that these devices generate seems to be concentrated among a tiny number of technology entrepreneurs who probably live in a faraway country.

These stories awaken our fears of being overtaken by others on the economic ladder. And now that our mobile phones talk to us (Apple launched Siri, the artificial voice that answers your spoken questions, on its iPhones in 2010), they fuel dread that they can replace us, just as earlier waves of automation rendered much human capital obsolete.

I had the pleasure of meeting with Abe. He sticks to the script, telling a story of taking aggressive and definitive action against an economic malaise that has plagued Japan for decades.

Abe is also described as reviving Japanese national patriotism, even nationalism. Though I heard none of this from him in my meeting, I think it may be a central part of his story, too.

Nationalism, after all, is intrinsically bound up with individual identity. It creates a story for each member of the nation, a story about what he or she can do as part of a successful country.

Some of Abe’s most controversial steps, such as visiting the Yasukuni Shrine, despite Chinese and South Korean objections, only increase the story’s impact.

Still, it is not easy for national leaders, even those with Abe’s talents, to manage such stories, just as it is hard for film producers to make a blockbuster every time. No leader can consistently shape the narratives that affect the economy. That does not rule out the need to try.

Robert Shiller is a 2013 Nobel laureate in economics and professor of economics at Yale University.

Copyright: Project Syndicate

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