Economy

The Story Of Money: How Human Behavior Shapes Economies — And Vice Versa

12:23pm January 21, 2020

What if our economy is built not on traditional theories of rational behavior, but on narratives and psychology? sesame/Getty Images

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Many people think of the economy as following a set of fairly scientific principles.

We buy more if things are cheap. We buy less if they're expensive. Companies hire more people if it looks like the economy is growing. They cut back if it looks like things are going to tank. Or say you're in charge of the Federal Reserve. Economic indicators help decide whether to raise or lower interest rates.

All of this seems very rational, very mathematical.

But Nobel Prize winner and economist Robert Shiller suggests that this kind of thinking might be too narrow.

This week on Hidden Brain, we talk with Shiller about the role stories play in our economic lives — not just the purchases we make as individuals, but the fate of entire economic systems.

Then, we go further back in time to examine a story about what the world look like before money was invented. It's a story built on the idea of barter.

"It goes something like this: in the beginning, before there was money, if I had something that you needed, I would approach you with that thing and see if you had anything that I needed," says anthropologist Bill Maurer.

"The problem is that when we look around the world and in the historical and archaeological record for instances of this kind of direct barter, unfortunately we don't find it."

Maurer challenges established ideas about the origins of currency, and highlights the connection between money and relationships.

"Society is a thing of ongoing continuous relationships. The settling and unsettling of debts, on and on and on and on and on."

Additional Resources

Narrative Economics: How Stories Go Viral and Drive Major Economic Eventsby Robert J. Shiller

Tulipmania by Anne Goldgar

The Truth About Tulip Mania, by Lizzy McNeill and Sachin Croker, BBC, 2018

Laffer Curve Napkin at the National Museum of American History

The Anthropology of Money by Bill Maurer, 2006

How Would You Like To Pay? How Technology is Changing the Future of Money by Bill Maurer, 2005

The Deadweight Loss of Christmas by Joel Waldfogel, 1993