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[...] Shiller appears as the creator of 'narrative economics' which aims to study the 'narratives', the 'stories' . on which agents rely to make decisions: 'By narrating the economy, I mean the study of the propagation and dynamics of popular narratives, stories, in particular those related to interest and emotion, and how these narratives change over time and how they try to explain economic phenomena.' R. Shiller, Nobel Conference (my translation). "We must consider the possibility that sometimes the main reason for the severity of a recession is related to the prevalence and vitality of certain stories, and not to feedback or multiplication effects that economists like to model. [...]
[...] For Keynes, agents act on the basis of expectations that are not based on 'rationality', for example, the decision to undertake, to invest assumes becoming 'illiquid' for a very long period. As uncertainty is 'radical', it is taking an 'irrational' risk. Investment is therefore based on the 'animal spirits of entrepreneurs' i.e. their instinct, their intuition . and not on rational calculation as in the 'classical' approach. Moreover, expectations are 'social', which induces significant effects. This is what he tries to show through the famous metaphor of the 'photography contest'. [...]
[...] The sense I give to this term is that it has when one qualifies the prospect of a European war, the level of copper prices or interest rates in twenty years, the obsolescence of a recent invention, or the place of the owning classes in the social scale in the seventies. For all these questions, there is no scientific basis on which to build the slightest calculation of probability. Simply: we do not know' Keynes, Poverty in Abundance, 2002. III. Conclusion: The 'Animal Spirits' Revisited Recently, Keynes' 'animal spirits' have been brought back into fashion by two Nobel laureates in economics: George Akerlof and Robert Shiller. The latter in particular shows the importance of 'stories' (narratives) that we tell ourselves to make decisions in uncertainty. [...]
[...] Uncertainty: Impossibility for a person to know or predict a fact, an event that concerns them, feeling of precariousness that results from it. I. Uncertain Times « He who lives on commercial wealth depends on a metaphysical public, an invisible, unknown power, whose needs he must satisfy, whose tastes he must anticipate, whose wills or forces he must consult; a power he must guess without its speaking, and which he cannot risk misinterpreting, without risking his livelihood and his life on each bad calculation. [...]
[...] The 'animal spirits' and uncertainty John Maynard Keynes (1883-1946) has always been interested in uncertainty. His training in mathematics allowed him to write in 1921 the 'Treatise on Probabilities'. For him, the question of uncertainty is central because economic agents act on the basis of expectations of the future. This future appears as a subjective representation of the future. According to him: monetary economy is essentially an economy where the variation of views on the future can influence the current volume of employment and not just its orientation'. [...]
