Apr 5, 2010

The power of narratives

Last night, I realised that we should focus more strongly on narratives. Eminent economists (Akerlof and Shiller, 2009) already drew attention to the role of storytelling in professional behaviour of financiers. They argued that envy-producing stories of young millionaires, for example, were a driving force for many, and securitised mortgages were considered safe because smart people were buying them. I was wondering, then, if the power of narratives causes public outcry about bankers' bonuses vis-a-vis criticism about other patterns that contributed to the financial crisis, such as complex models to assess risk. Bonuses and exorbitant life styles just more easily translate into narratives than complex models.

This made me wonder how narratives may be effective in illustrating (the need for) cultural change in the financial sector. If we come around translating underlying patterns in clear and striking examples of actual behaviour, awareness of how ‘intangible’ aspects, such as socio-cultural patterns and power, affect professional behaviour may be increased - as well as the actual workings of economic models. Both the public and financiers may easily pick up things about behaviour in the financial sector and its social consequences when analyses are presented in clearcut narratives they can relate to.