Work some colleagues of mine and I did with the Bank of England is now available as a BoE working paper. It has some pretty substantial results showing that how we feel about narratives (the stories we tell ourselves and each other) affect economics (markets, productivity, employment, etc.) rather than the other way around.
This direction of causality may become even more important. As Nobel Laureate Economist Robert Shiller has observed:
The history of speculative bubbles begins roughly with the advent of newspapers…Although the news media…present themselves as detached observers of market events, they are themselves an integral part of these events. Significant market events generally only occur if there is similar thinking among large groups of people, and the news media are essential vehicles for the spread of ideas
Now that “the news media” is really social media, the speed at which the stories we tell ourselves spread is only getting faster, and the potentially volatile effects on economics may only be greater. Hopefully this paper can, in some small way, help us understand that more.