New Paradigm Of Behavioral Economics

Zheng Lei / Wen

The economic community is fully used to quantitative analysis, using simple to almost unrealistic assumptions, by studying many quantitative indicators that are easy to perceive, easy to track and easy to sort out, to explain economic phenomena, and to make predictions for economic behavior. There are some criticisms about the methodological defects of economics. "When economists try to solve ethical, cultural and social problems in purely economic terms, they are also fooling other theories, but it is usually economists themselves who are fooled in such cases" (Morson, Schapiro, 2017). Douglas North (2005) emphasized the important role of human intention in the development of economic system. These intentions are basically expressed in narrative form.

We can not explain and predict the real world from the perspective of pure economics. This is an obvious consequence of the gradual disconnection between economics theory and practice. New classical economics methodology has been questioned for decades. In order to get rid of the awkward situation of theoretical prediction and reality, many western mainstream economists are also introspection. In recent years, the progress of behavioral economics and complex economics shows a new research path.

Advocating economics's reference to humanities and integrating the idea of "temperature", "perceptual social life" and "narrative" in historical scenes has long been suggested, while professor Robert Hiller of Yale University has developed it into a complete theoretical framework. Hiller put forward the concept of "narrative economics" in 2017, and claimed that the related work has been going on for decades. In his book "narrative economics", he introduced the "narrative" into the field of economics, making it an important dimension of deconstructing economic phenomena and making more accurate economic forecasts. In this book, Hiller enriches the interesting historical narrative that he can not hold in his thesis, which is what he calls "perceptible history". These historical details are very fresh and interesting, which greatly enrich people's understanding of the past economic events they studied. This book contains 9 long-term economic narratives: panic, confidence, frugality / conspicuous consumption, gold and silver standard, automation, artificial intelligence, labor force, real estate cycle, stock market bubble and inflation. In the course of the discussion, a large number of first-hand historical documents from the public are cited, presenting the plentiful realities behind the economic events. The readability and historical data are very strong.

Bitcoin narration is an example. How did the value of bitcoin rise from 0 to US $300 billion in a few years? Hiller believes that the price of bitcoin has increased by 40% in 40 hours, which is the embodiment of the power of economic narrative. Few people who engage in bitcoin transactions really understand this technology. But technology theory is not the core of narrative. They only need to know that this idea is put forward by some clever mathematicians or computer experts. The wealth creation effect of bitcoin narratives has quickly been echoed by the public. This is an elaborate narrative designed to disseminate, allowing non professionals to participate in narratives and establish identity, hoping to better control their economic situation. This narrative contains a lot of stories that people enjoy and become rich. It is highly infectious and inspiring, and the transmission rate is very high.

If we subdivide the bitcoin narrative into academic narrative and public narration, we can see the significant difference in the transmission power between academic narrative and public narration by retrieving the bitcoin literature. There are hundreds of articles in the core algorithm of block chaining technology, and up to more than 15000 articles on bitcoin. Bitcoin is oriented towards the future. This simple beautiful language is easier to be remembered and disseminated. People are interested in a narrative, precisely because many other people are interested in it. This shows the characteristics of communication. Through snowball spread, a narrative may become an important driving force in social and economic activities. This is a new perspective for the study of classical economics. According to Hiller's logic, if we can predict which economic narrative will become popular again, it is possible to predict the corresponding economic behavior and economic operation.