Narrative Helps the Human Mind Make Sense of Events

The human mind crafts its understanding of events by forming them into a narrative. Kahnemann and Tversky’s “representativeness heuristic” suggests that people form expectations based on an idealized story or model, and evaluate expectations based on how well it fits that model rather than probabilities.

There is a powerful social aspect to narratives: when confronting an ambiguous situation, humans may turn to narrative to adapt a role that they have heard of to help govern their response. When facing a difficult situation with no clear, logical answer, the human brain may rely on memories of past experience—as well as others’ experiences that have been related through narrative—to determine the action to be taken.

Narratives give us scripts that guide our action based on little more than that we had heard narratives of others doing these things. Yet, economic narratives may comprise a small proportion of our actual popular talk.

Economic narratives often rely on an element of human interest. The association of a narrative with an identified personality lowers the rate of forgetting. It makes the narrative concrete and human.

People will make decisions based on their perception of what others are thinking (which, in turn, are based on perceptions of what others might be thinking).

Amy Webb suggests that narratives are powerful tools for communicating future scenarios, providing strategists with a clearer vision of possible outcomes than abstract data can provide. This enables them to imagine possible scenarios and determine how to act in the present in response.



Shiller, Robert J. Narrative Economics: How Stories Go Viral and Drive Major Economic Events. Princeton: Princeton University Press, 2019.