ABSTRACT
Narrative is a term used widely to denote and discuss processes of representation and communication in a wide range of disciplines, including history, psychology, and the social sciences, but also the natural sciences and modern neurobiology. Broadly conceived, narratives are the stories that people tell themselves and others to construct mentally and communicate to others the world in which they live, its past, and their experience, which they use to make decisions. But until very recently narratives have been omitted from modern economics, which has hitherto left aside the need for a theory of mental representation to explain how agents process data, just as it has bypassed an explanatory theory of their expectations. This chapter reviews some recent contributions from economists who use the term narrative, and asks how it is used in other disciplines and what narratives “do.” It reviews both theoretical and research-backed reasons for supposing that economic narratives—structured higher-ordered mental representations of economically relevant variables that summarize relevant causal, temporal, analogical, and valence information about the economy—play a driving role in an economy, and briefly examines new empirical methodologies.
