good evening good evening all of you also people following online this edition of the festival of economics that we decided we would dedicate to the memory of alberto alessina robert chiller thank you for being here with us this evening we are very happy to have you here we actually tried to have you at previous editions of the festival uh and now we managed so we are so happy to have you here mr schiller is one of the economists who throughout their career were never afraid of saying things as they are or where also going against others and this meant going against mainstream economics in terms of the behavior for instance of financial markets being not consistent with the theory of efficient markets and the postulates of the theory of expectations and rational expectations so these analyses and studies were so important that he received the nobel prize on economics with in 2013 together with two other scholars lars peter hansen will be with us tomorrow the festival by the way and so they received this novel due to their contribution in terms of pricings and national market prices and financial markets so mr schiller was also one of the very few economists who managed to foresee and forecast the crisis the financial crisis and he actually launched within the context of his uh publishing activity a number of signals of he warned uh against that in uh he in his book from 2000 exuberance to rational exuberance he wrote about that and also in 2005 he wrote about that there is a famous paper of his from 2003 uh in which he uh specifically focused on speculative bubbles in the real estate sector so again in 2005 in a book and then in an article in september 2007 on the eve we might say of the beginning of the financial crisis one year before the crisis he wrote that there would be a collapse of the real estate market in the united states with the following wave of panic so he really was able of forcing things and he received many accolades and awards due to that um so one of the very characteristics of robert schiller's work is the following you see in the beginning he worked a lot with quantitative data and econometric studies at the beginning of the career and then he moved on the to the border between economics and psychologists and together with richard tala he is considered the founder of behavioral finance which analyzes the psychology of investors and in this respect one of the things that he studied most was how ideas contaminate and infect behaviors in a way so that this can account for certain trends in financial markets and possibly he was one of the first economists who studied the s-i-r-r models successful infected and removed sir models which is what we're using now in order to study the epidemic the covered epidemic of course you used it to investigate the contagion of and infection of ideas but this is the model that we are using now to understand in economic terms what is happening to uh or with kovaid so tonight he will address us on the contagion of bad ideas that go viral i believe that one of the bad ideas that he will probably focus on which is for me uh very important because it is something that i that shows up and comes up regularly is the fact that you can reduce taxes and do so in a self-financing way which is the laffer curve so i must say that also recently in italy in the political debate this idea came forward again it is the dream of many uh people in government to be able to curb taxes and finance that at the same time so possibly uh you will talk about that as well so without further ado thank you again robert schiller for being with us and you have the floor we have the the contribution lasts approximately 30 minutes and then we will have some minutes for questions or comments so people following us online should send to us of their questions and comments and we will voice them so thank you again you have the floor what is yours thank you uh so thank you for that nice introduction uh actually i wrote my phd dissertation on rational expectations and i think there is something to that for limited application um so um i i you also brought up kovid 19. i have to say that it was a strange coincidence for me that my book on narrative economics came out right before the covid 19 epidemic had any uh publicity at all before it started uh suddenly the world is engulfed with talk about epidemics so let me move to my slides uh i think they're i'm going to be talking about popular narratives as if they were diseases that spread by word of mouth we say going viral that's a that's a analogy to a disease epidemic already so it's in our thinking i think it won't be too much longer that it finds a place in much more economic discussion than in the past but the thing i have to emphasize at the beginning is that human speech which is a human universal it evolved uh in darwinian evolution and it is the key uh thing about how our society functions because through speech we coordinate our activities uh and and settle on our objectives but you have to distinguish between speech conveying matter of fact information and speech which is storytelling uh so a narrative is a telling the definition of the word narrative is a telling of a story that imbues it with meaning emotional significance approval or disapproval or moral lessons and it tends to focus on new things or things that are unusual uh that that make a good story and so we end up forming our economic judgments in while remembering stories human interest typically there has to be some human interest and then we we tend to remember stories that have gone viral so my approach to understanding economic history is to look at what were people saying then and i'm talking about ordinary people not professional economists now sometimes they will pick up on that but not always mostly not so here is my book it came out in english in october uh and it is now just now coming out in italian uh and uh uh then uh in german and other languages as well but the the the thing that we put on the cover back last year was a a diagram showing a epidemic curve i'll come back to that in in a minute but it's really also i could have said epidemic economics as the as the title of the book but it's an it's going to be not a disease epidemic usually but a uh a a story epidemic that spreads by people retelling the story now narrative uh is something that is increasingly watched or talked about in all of the social sciences this shows a count the black bar lines show a count of the number of the percentage of scholarly articles that contain the word narrative all right and you can see that well the field with the least attention to narratives is finance kind of hard to believe since i think narratives matter so much in finance economics is the second worst but there's a array of hope here if the gray bars are just for the last 10 years and you can see that in all social sciences including economics and finance there is increasing talk about narratives why is this i think it's partly because people are discovering the importance of narratives more and more people are but also because then we now have digitized text that we can search like for example here i'm using jstor which is a a digitized version of scholarly journals in all of these including hard sciences as well what i want to try to understand in this book is uh you could say bad ideas but ideas that create an unnecessary fluctuation in our activity i mean the sociologists in the political scientists will talk about other things regarding narratives but what i'm interested is understanding why we the economy breaks down from time to time so here i have shown the real gross domestic product per capita in the united states that's the blue line the red line is consumption expenditures personal expenditures on consumption and these are corrected for inflation and population growth well what you see is a wiggly straight line this is a log scale on the vertical axis so the changes are like in percentage terms so you can see that they're they're both growing very steadily over over better part of a century but there are these wiggles we call those wiggles recessions or depressions this thing starts out with the great depression in the 1930s that's the biggest drop of all and then this is this is 2020 this is this year it looks kind of outstanding doesn't it it's a dramatic event topped only by the great depression in fact it isn't even topped by the great depression in the suddenness and intensity of the drop that we've seen so we want to predict where this is going and i'm not going to do that but i'm going to give you insights on how we can better do predictions like that but a lot of social sciences looking at the curve after world war ii this is world war ii uh after world war ii they see um a jagged shape which some people think they see a a cycle looking like a sine wave about it's not really a sine wave it's there there are fluctuations in it but they're not all the same length and the same size so it's better to say that there these might be a sequence of epidemic all these ups and downs and maybe we should understand the epidemics of narratives that go into them so what is an epidemic curve i showed you one on the cover of my book but i have here uh the daily infections uh of kovid 19. uh and so uh in italy and you can see that it all started in uh well it started in china but started in italy uh around march and it formed a hump-shaped pattern that's the epidemic curve and it's gone pretty much gone it's not gone but it's low level since this vertical dash line is today well as of yesterday right and now don't get alarmed by this red line that's a worst case scenario if people's drop all mitigation efforts we're not going to do you're not going to do that uh but it is predicting a second wave this is what epidemics do they're they're they tend to be hump-shaped curves and then they they tend to recur uh after a while maybe when there's a mutation or or something in the environment changes like the coming winter um so but that's the model that i want i want to think of the business cycle as not a cycle but as a sequence of epidemics so what's an example of a narrative epidemic uh well here's an example was already mentioned art laffer presented his theory called the laffer curve at an occasion like this in front of two famous men this is donald rumsfeld secretary of defense in the united states and this is dick cheney who was vice president of the united states so this is big big time people in the united states and art laffer is a professor of economics there was a fourth member this is a reenactment which you can watch if you want on the web fourth member jude winiski died before this reenactment so he would be sitting here but there's a story about a dinner oh and by the way he drew the diagram for his theory on a napkin like that he didn't see it before him for some reason the story always mentions the napkin so this is what jude waniski wrote up about in his book the way the world works in 1978 nobody remembered that dinner was of no significance to most people this is a diagram that that art laffer drew on the napkin and the diagram shows how much revenue tax revenue you would get from various tax rates if if you tax income at a rate of zero you'll get zero revenue that's uncontroversial if you tax it at a hundred percent you also get zero revenue because nobody will work if you're going to take all the money from them so the curve of revenue as a function of tax rates has to be something like this and then the punch line this is a little bit like a joke the punch line is if you have a certain amount of revenue if you're trying to raise a thousand euros or dollars or whatever you or a thousand million you can always choose either one of two tax rates a is the high tax rate there's always two of them except that except at this point here and so he could so he was accusing governments of mistakenly choosing a when they could have chosen b now that's where it ends it's like a punch line and a joke uh but it's a it went well because somehow the way jude waniski wrote it up who was a skilled writer it became a contagious story so here i'm doing an account on google engrams of the searches for the term laffer curve and you can see that it's a hump shaped curve but not as dramatic but it went up very fast and it was slow to die out and it hasn't died out uh as mr boiery says um so um this is the rubik's cube uh i mentioned it just as an example or do i have a reverse i'm sorry i had it revert the blue line is uh uh i never got myself confused uh uh rubix yes i think it's right okay sorry uh rubik's cube has taken a second wave uh i think i may have mislabeled my axes i'm sorry about that i'll have to go check this but the the point is they're both epidemics and rubik's cube is set up as an epidemic of a narrative also there are narratives and stories about rubik's cube rubric wrote a book about the title of his book is cubes and so everyone uh relishes the thought of going viral and it was storytellers who made rubik's cube viral i like to think that these are new ideas but the idea of the importance of narratives and stories is ancient i'm quoting from cicero the roman center a senator who wrote a book called de oratora in latin and this is a translation the first thing he emphasizes is that uh stories are central to the human kind if uh men are facetious mimics or storytellers uh moreover uh these stories should have some drama to them well he um he wrote about the prolucio before the uh gladiator combats in rome uh the the for this ill would invite would have actors come out and brandish spears uh and then they would actually fight but it was fake the people were why would they be interested in fake fights when they're about to see the real thing it's because the fake fighters were better at stimulating they were skilled actors and they knew how to create a story uh i think just watching a fight to the death might not be that exciting god for think of it it's hard to think of that and this is also uh so uh uh he's quoting simon edis who's another forgotten writer that things are most strongly fixed in our mind which are communicated and imprinted upon them by the senses and that these things are most easily retained in our minds when we have received from the hearing of or the understanding if they are also recommended to the imagination by means of the mental i he's expressing to a speaker the importance of visual images even imaginary visual you have to tell a story with a picture to it so that's the example of laffer it was the napkin that diagram on a napkin is somehow a visual image that's that's attached to that story and makes it contagious just as a mutation of a disease makes it suddenly contagious also as cicero said that when a speaker speaks to a large audience he is naturally excited in it to a more magnificent species of eloquence uh so it's something about how we prod each other into thinking that some narrative is especially important when you hear it again and again you think that lots of people are into this and it suddenly becomes memorable it may also your the contagion rate of stories may depend in other ways on others perceptions so john maynard keynes in 1936 gave the famous beauty contest theory of the stock market that people are like a beauty contest in a beauty contest that were then offered commonly in newspapers the newspaper would pick picture a hundred faces photographs and you were asked to pick the six prettiest faces and send that into the newspaper you would win if you got closest to the most commonly mentioned six so you're trying to guess what other people are guessing that tends to play a role in promulgation of narratives um so i i uh i look at what uh people saw the the october 19 1987 was the biggest one draw one day drop in world stock markets in history even it hasn't been caught up to since there was a 22 drop in the u.s stock market in one day one business day and so the newspapers before that though we were writing about risks that the market would turn into a tailspin or that portfolio insurance would push slides into scary falls but not people read those in the newspaper but they also knew that everybody else was reading those in the newspaper that was a narrative that you knew was popular and so it colored your thinking about what the stock market might do this is a picture that appeared in the wall street journal in the morning before the markets open october 19th 1987 the biggest one-day drop in history and what were they were doing they're comparing the stock market in the 1980s up to that date this is uh and and then they compare that with the stock market in the 1920s up to the 1929 crash uh and so there's a forecast implicit here for today here's a visual image that is presented to people on the morning of the of the 1987 crash suggesting that everybody's thinking that 1929 might happen again today and it did happen again today because everyone expected it to happen also we have to unders remember that it's not just one narrative but it's a constellation of narrative they feed on each other so when william jennings bryan wrote about bi-mentalism in the 1890s it swept across the world uh and when donald j trump you might have heard of him he's our president of the united states he has tweets and big rallies and he gets so much talk people are marveling how did he become such a center of attention well i'll tell you he's a good storyteller and he's and he's got a mind to keep reminding you of himself by saying outrageous things he does it again and again so he is understand i suggest you read one of his books he explains this about how you've got to keep yourself in the public eye if you want to be a big success read his books i hate to say i'm recommending anything from this man but but you know why he's there in the position he is um so these various stories short stories like the laffer curve are just part of a whole constellation of of epidemics and they can be affected by the silliest of components things that you wouldn't think have in them but but they're visual or other kinds of images that uh that can change the contagion right there's something to hold on to you uh and a an epidemic goes when the contagion rate uh a c goes above the recovery rate or or c times the number of susceptibles uh so uh i think i've already spoken about this the uh so um okay yeah so let me go back to the stock market this is a plot i took him from my nobel lecture of the stock market from 1871 uh to the present in the blue line like for example here is 1929 the stock market crash of 1929 we see how much it went down um and the the green and red lines are the present values of subsequent dividends with a constant discount rate so you can see that the true value according to efficient markets theory if if it were known perfectly is very smooth and trendy but the stock market was jumping up and down all around that the same thing is happening in different countries around the world this is uh usa china europe uh and i can't read it down here on my screen there's a similarity across countries for two reasons uh one of them is that we trade with each other the other one is we all read about the same stories this is a plot of home prices from 1890 to the present in the united states the blue line is the real price of a standard home and it's quite striking how much how little it correlates with building costs population or interest rate which you might think would drive home prices they have a life of their own and this is the biggest boom in home prices it was quite recent i've written you can read my book about the narratives that i think drove that it's in constancy in our thinking this is a a a google search count google engrams of the reference to the term fair wage the blue line and you can see that fair wage started increasing in the late 19th century and it peaked in the great depression that's like 1938 there the peak and then it went down it had an interruption during world war one i guess so but it went right back up so there were ideas brewing about fairness uh and then now they're on the down part of the epidemic group people didn't talk about market wages which is the wage in the market which is determined they tended to think of it as fairness that drives market changes it was also a labor movement this is uh just counts uh from google searches uh uh of uh of uh for the term labor union forget that this is some sort of uh anomaly but we see an epidemic curve for labor unions as well and it's it's dying out it may come back we might get a second wave so let me just talk a little bit about epidemic theory and mathematical epidemics here again is just another example of an epidemic curve about five years ago the ebola epidemic in africa which was successfully contained outside of africa we didn't have many cases but you can see that it was rising in in this particular place in ebola in lofa county it was rising for about a dozen weeks over this period the contagion rate uh was higher than the recovery rate and then it peaked the contagion rate started falling uh why did it start falling and fell below the recovery rate so people are getting better in greater numbers than are getting sick and then it just disappeared for a while it's hanging by probably by a sliver and threatens to come back again but that's the model that where that was mathematized uh in the field of mathematical epidemics by kermit and mckendrick it's called the s-i-r model of disease epidemics these are medical school things but that there are three um as mr boris said there are three uh components s i and r are our susceptibles people who haven't caught it yet and are not immune i is the person is the percent they're both in percent the percent of the population which is infected and spreading the disease and then r is the percent of the population recovered the key equation is the middle one here uh and it says there's a c parameter times the number of susceptibles percent of susceptibles is the contagion rate whereas the recovery rate is constant r uh and so d-i-d-t is high is positive when contagion is stronger than recovery uh but the model has in itself the the end of the epidemic so this is a solution for parameters c equals 0.28 and r equals 0.14 roughly the uh the con the parameters i would guess to apply to covid 19 if there were no mitigation efforts no one wearing face masks etc so what you can see is that the epidemic curve is is the orange line here it's the number of new cases per day the black line is the total number of infectives of course greater than the number of so either one of these could be called the epidemic curve this the dashed line is the percentage of the population who have recovered and in this case if there's no mitigation effort it ends up at about 80 percent 80 percent of the population are immune this is called herd immunity there won't be any more because the contagion rate is below the recovery there'll be a few but no no trend and i won't get this is the size of the epidemic is dependent on c over r which is called the basic reproduction number the speed of the f uh the c over r determines how many people ultimately catch it but the level of c or r determines uh how fast the epidemic goes you can have fast epidemics that last a matter of days or weeks and you can have slow epidemics that last uh a century you can have epidemics that hit 90 percent of the population or epidemics that hit 10 percent of that population you can do it either way by adjusting c over r unfortunately c over r with no mitigation for covid19 appears to be dangerously high and that's why we're doing all this work to flatten the curve the epidemic curve this is the size of the epidemic depends on the basic reproduction number uh and it uh it can be as it can be almost 100 percent of the population if c over r is high enough this is what we're trying to do we're trying to flatten the curve uh and these are predictions for covid19 in the united states but the same thing would happen anywhere you'll end up with fewer deaths if you can flatten the curve lower the contagion rate or raise the recovery rate these are waves of epidemic which i already talked about and these are among possible scenarios for arcovid19 according to the center for infectious diseases research and policy they can have repeated waves that just go on and on every uh every wave period or they so if if you saw this in a a narrative epidemic it would create maybe a business cycle but it's not generally so precise and they can be different size at different times so so um this is just uh some predictions uh showing individual countries you know epidemics occur at the same time in in a narrative constellation we just had an epidemic in the united states from a uh it was really a story told by a video or actually multiple passerby videos of police brutality in the george floyd case so i don't know if this picture strikes a bell in you i thought it would only be in america but it turns out that people all over the world heard about this episode why did they hear about it because it was the story was told so well by the camera the camera people at the scene uh and it's a horrifying story also people will click on it and uh on the social media because they think they should be informed it shows a black man dying at the under the knee of a white police officer you normally wouldn't click on that but maybe you will this time because you want to see what's happening other things have a narrative epidemic these are economic models the isl model the real business cycle model the overlapping generations model the multiplier accelerator model these are all famous models but they're all dying because time is they're still good i think i like these models but they're no longer fresh they're no longer contagious also famous economists i've got a number of them here and they all go through epidemic curve it seems to me so fundamental to our lives it's kind of sad uh some people outlive their uh the epidemics out live their lives like henry george whom you've probably never heard of but he died in the late 19th century around here his epidemic kept growing why not because he was doing anything he was gone because they were contagious they're not so contagious now because they're more 19th century i guess we don't tell his stories anymore most of us don't so in my book i list a lot of epidemics panic versus confidence frugality versus conspicuous consumption the gold standard versus bimetallism labor-saving machines automation real estate booms and buffs stock market bubbles boycotts profiteers and the wage price spiral there's so many and this isn't an exhaustive list there's so many epidemics that it's hard for us to manage them we have to find some way to get computers to tabulate epidemics and give us a sense of what is what is affecting the markets and what is and what is uh driving changes but let me just mention a couple of these the idea of confidence as an important economic variable it goes back to the 19th century when it was financial panics uh that caused this is the blue line the financial panics uh drove the epidemic uh and these are particular this is the panic of 1873. this is the panic of 1893. this is the panic of 1907 but somehow they managed to keep going ratcheting higher through time and since then we've changed our language now we talk about business confidence so this redline went this is business confident it soared during the great depression people were saying business men have lost confidence after the war came they forgot about business confidence and it went right back down but it's back up again or it's sort of like a and green is consumer confidence uh they've all fallen off somewhat uh this i think may come back this is the great depression has become one of our favorite narratives and you can see that it grew after the great depression it wasn't particularly prominent during the great depression here's the great depression but now we have this story and then when the 19 2007 through 2009 financial crisis came attention to the great depression sword absolutely sword uh and we named it the it after the great depress it's been called the great recession so we were clearly reliving another narrative and people stopped spending and the stock market collapsed because they thought it might be 1929 again technolo i have one more narrative and i'll stop uh the technological unemployment narrative uh it started in the early 1800s but started in a small way that people began to fear machines replacing jobs and so this was weaving machines in in 1811 with the i think there we have it well then there was there were agricultural machines that were replacing farm labor the concern about tech about labor-saving machinery replacing jobs rose until around the great depression then they devised another new word for it technological unemployment and it was huge in the great depression and then it's following an epidemic curve it's falling off again so we had to invent new words to keep it live it's like a mutation uh in the epidemic another idea that that relates to this loss of confidence is the idea that we have involuntary unemployment that there's such a thing as involuntary unemployment back in the 19th century if someone lost a job people thought it was his or her fault maybe they're not very good at what they do there was some talk about involuntary unemployment but they can't use the word unemployment it hadn't been invented yet the word unemployment in english was invented in the 1890s or thereabouts and they called it idleness but idleness has a connotation of laziness so what happened is we in the great depression right around here this is a great depression we learned to think of the unemployed people as victims it wasn't their fault and i think this changed a lot of our impressions it made us worried about becoming unemployed and it made us less likely to want to flaunt our wealth and i think that has been a factor in recent fluctuations here is other terms for uh they each have their own epidemic robot automation artificial intelligence etc uh so uh but they've been coming in more and more in the 1930s they were talking about robots you can't see it very well here but there they were the dial telephone was a robot i called that at the time because it replaced the job of an operator so even some very smart people thought that the great depression was caused by robots replacing jobs essentially this is albert einstein remember him he wrote he said in 1933 in an interview that the depression was caused by the improvement in the apparatus of production that has decreased the need for human labor and therefore eliminated part of labor from the economic circuit so he thought he knew what caused the great depression hardly anyone talks about this as a cause of the great depression but i think it was indirectly because it made people fear that they were going to lose their job and so they they stopped working or they they stopped spending which was horrible for the economy now we're stopping spending because of covid19 which is different but it could launch again a narrative like this because this narrative is in the wings it's like an old disease that might suffer another wave so i think we'll have a go as my last slide will have a interesting future for narrative economics uh because par partly because new technology like social media are changing our mode of contagion um there will be new data availability uh with digitized uh there is it's it's growing digitized text and speech and a new form i think economic theory will have to take into account these things uh and we ought to start collecting better information even though we have tons of digitized text we can do it better uh in the spirit of recording history we still don't hear common conversations i have to rely on newspapers and i'd like to guess what narratives were okay i'll stop uh with that and open it up for questions thank you so much for this fascinating lecture grazie miller so thank you so much for this splendid presentation you give us a lot of food for thought and perhaps also during this crisis some terms perhaps will become uh viral for example the term a contagion the fact that you can get infected now i have two questions well there are many questions but uh two questions that have just uh arrived the first we have learned that self-regulation for the economy creates instability in cows so controls and regulation authorities have been set up today's media to this lack of regulation and what do you think about the future do you think that there will be the need for greater regulation on all these issues and then second question as we have seen during the crisis of the bank system of the 21st century or during the covid 19 pandemics events which one day were not considered the other day can cause crisis and recession do you think that in the future it will be possible to uh avoid these black sounds so let's start from these two questions uh okay i wrote another book about regulation with george akerloff uh called fishing for fools and we talk about we're we're not in favor of too much regulation uh but we think that the problem with the capitalist economy uh is that we need uh there's a tendency to uh to manipulate or mislead and we have to have authorities imposing the truth uh it's a it's a messy problem uh so more recently we sense that we wrote that book we've seen the misuse of the social media to spread lies uh and uh to impersonate others uh to spread lies uh and uh we have to have some kind of regulation uh and that's that's a deep question of exactly what form it would what format would make but uh what does a social media site do when it sees that someone has made a a video go viral that's based on a lie a known lie and that's a difficult question we do have a problem that has been emphasized recently by anti-regulation groups is that there's a tendency for regulations to pile up they keep thinking of new ones and they don't cancel the old ones that didn't work so well so that life becomes very difficult to comply with all of the regulation so that's something that we uh uh we have to allow to happen um now you you uh the second question was about um black swans a black swan is something so rare that you think it could never happen and then suddenly it does so a good example of a black swan is a worldwide pandemic like covid19 we haven't seen one as bad as this since 1918 and so it's easy to imagine that it can't happen well epidemiologists were warning that we should be prepared for a global pandemic but they weren't heated why because the story had lost its resonance first of all the story of the 1918 influenza epidemic is not so dramatic it's um uh and in the form of the story what what is the story somebody got sick they went to the hospital and they died uh is that an exciting story i don't think so world war ii is so much more exciting they make movies about it they don't make any movies about uh about the influenza epidemic of 1918. it's not story worthy so it gets forgotten until it happens again and then suddenly it dominates that's what happened with covid19 you couldn't get anybody's attention to the possibility of an epidemic just a year ago but now it's it's because of its uh connections to current events and to things we've seen it's highly it's a contagious story uh that uh unfortunately there's all kinds of contagious stories occurring at the present time because it's a black swan event and things that are probably unlikely that for example the the kovit 19 was started by some bad actor who did it on purpose and created a new virus that same story which by the way circulated him during the influenza epidemic they blamed some many people blamed the 1918 influenza epidemic on the germans at the end of world war one who were desperate and they thought that even if they couldn't protect their own citizens from influenza they could at least shake things up and who knows it might help us win the war that was a narrative epidemic totally forgotten now so black swans are a fact of life that the world suddenly seems to change before our eyes in an important way that we never anticipated so kovid 19 is a good example of that good queen so there is also an issue related to information whether we can do something in order to limit information so that there is excessive contagion of these ideas and then another question a question from myself well you should us epidemiological pro models like the sir well these are mechanical models apparently very simple but one of the reasons why probably they did not protect the contagion of kovid 19 lies not so much in the fact that mitigation measures were taken by various governments but also because probably people reacted to the spread of covid19 by adopting responsible behaviors for example putting on masks or avoiding going to crowded places so also people's reaction is important in order to stop certain uh situations so i wonder uh in the case of narrative can we speak of something similar or do you think that in the area of narratives there is a sort of a mechanical model because you know it's very difficult to counter these ideas when they get spread so what do you think about that queen yes governments naturally limit information to try to encourage people to rekeep their confidence throughout every depression there are efforts by public figures to restore confidence and they're very careful not to say anything that might disturb confidence that's unfortunately a problem so our president donald trump was trying to keep confidence up when he said at the beginning of 2020 that he thought don't worry about the kovid 19 i think it would just go away and that the mainstream media are being too alarmist about it he was he had good intentions i suppose when saying that uh but uh the same thing happened in world war one by the way when the world war influenza epidemic was rate was starting to really take hold uh governments didn't want that reported and newspapers self-censored i think there wasn't much mention of the epidemic when it began in the spring of 20 of 1918. and unfortunately that makes the epidemic worse you have to scare people at the beginning of a disease epidemic so that they'll they'll take responsible maneuvers so the sir model you're right is a model that um uh that assumes a constant seek parameter and so the changes in the contagion rate occur only because of changes in the percent susceptible in the population uh and so that's a that's a uh extreme case there are so many models uh variations of sir models you can put things into it that might represent uh uh mitigate uh you could put in a parameter for c that declines with time uh that uh so sir model is just it's almost 100 years old so let's not expect too much of it but the cdc has a a link on its website that's the center centers for disease control in the united states in which they look at forecasting models for the covid19 epidemic and conclude that about half of them are sir based others are so are sort of reduced for model that's not less theoretical so but there's a lot of reliance on an sir basis for modeling of epidemics and it seems very intuitive that it should be part of a model but yes responsible behavior and narratives that affect responsible behaviors are unfortunately or fortunately or not are part of the epidemic so in the united states there became a narrative that uh that wearing of face masks is uh is unmanly or uh is it's a political statement so a lot of people who are trump supporters will not wear face masks uh and uh that's an unfortunate narrative there's a co-epidemic of that narrative with the uh with the actual covid19 disease epidemic thank you so much uh grazie so thank you unfortunately well we have many other questions just one just one the last one at a time when single people individuals have a huge amount of sources of information how can they um rely on these uh sources and what about what suggestions can you give so that individuals can navigate in the world of information so what do you think about the massive presence of information and how can one navigate in it yeah that's a difficult question and we could spend a lot of time on that topic uh there is a loss of trust uh in in the present political environment and it's uh seen around the world there's a sense that that people are more dishonest than we thought they were a year of years ago and i think that people have to think about uh they have to understand what makes things go viral and disabuse themselves of certain notions so the certain one notion is that a newspaper that you've read for many years you've never seen a lie in the newspaper and uh so you trust it that that that develops there is a thing of reputation that uh that can persist but eventually the reputation may be lost uh and then that brings chaos uh there's a there's a big sociological literature on trust and economics literature that uh an ambiance of trust that there are some people or some media that you can trust is very important and it's something that's easily lost and that's that that's hard to control i think famous publications of the past have have lost some some of this trust and but i think we have to think about we have to avoid thinking that public opinion is not in itself a reliable designator of trustworthiness uh and uh that's um that things will go through epidemic we have to reflect that that bad ideas will go viral and affect a lot of people and realize that a lot of people are not reading carefully there may be of important report that came out by scholars or government officials on the state of the economy but very few people will read that so they get their impressions from the from the virality of the narrative we have to all maybe they should be taught in schools so that people will learn to be to be respecting uh honest reputations uh and not but also to recognize that they they can lose their their trust and we have to we have to be individually responsible we have to actually read studies from time to time if we're going to know how to vote grace so thank you so much so the importance of reputation and then the fact that economists should pay more attention to narrative in the future i hope that the word the narrative will be more frequent in scholars uh articles thank you so much mr schiller for this splendid presentation there is uh there are many other questions but unfortunately we don't have any time left hopefully we will welcome you here in trento in the future physically and also have physical audience thank you thank you goodbye you