#28 Narratives

...wherever you go, it is about narratives where people believe in

Hi all,

Even when you dive deep into some topics, read books, travel, or do whatever, the way to connect to people is through narratives—stories you can relate to. I have had some ‘narrative times’ lately. In a few days, I went from the summer palace of the Pope in Rome with Bforgood, discussing with a bunch of people about leadership, crossroads and narratives, to a philosophy festival in Amsterdam (Brainwashfestival), where it was shown that narratives (in this case a performance by an author playing a politician) can make a difference.

Many forget that every human interaction is based on a narrative — a structured story or account that interprets and communicates human experiences, often with an underlying purpose or meaning. They offer frameworks that help individuals and communities interpret their lives, actions, and the world around them.

For instance, philosophers like Paul Ricoeur and Alasdair MacIntyre argue that narratives shape our moral and existential understanding. According to Ricoeur, narratives mediate between our lived experiences and the interpretations we form of them, helping us place events in a coherent framework of beginning, middle, and end. Meanwhile, MacIntyre posits that humans are "story-telling animals," asserting that narratives are essential to moral development as they give context to virtues, values, and choices throughout a lifetime.

I am not a philosopher. I am an economist. I have seen that many (macro) economists strongly believe in their theories as an objective kind of truth, no matter how often it is falsified. That is how we get to the idea that green growth is possible: not because there is a reality that shows its possibility, but because we have a narrative, an intrinsic conviction that it is possible. You can argue against it regarding rational arguments; that does not matter. Even if it is demonstrated that the current narrative does not deliver a good life for all people and living creatures in the future, the narrative (or paradigm) stays strong.

So, we need to change the narrative. However, this might be the most challenging task we have today. I want to highlight two examples of new narratives: Pope Frances’ Laudato Si’ and Kohei Saito’s ecological reinterpretation of Marx.

A new narrative—almost like a new religion, a firm conviction—that everyone will embrace is probably more important than innovation. We have all the solutions; we only need to believe those solutions and ideas are our new narrative instead of a sobering outlook for our future. But to get there, we probably first must understand that we always live in a narrative.

A warning: part of this blog is more philosophical than economic (only one graph!). However, it is critical to understand that narratives are, in the end, what drives societies from one stage to another. If more people believe a different narrative, it will create a new reality. In other words, the stronger the latest narratives, the stronger the feedback loop in a system that moves a system towards a tipping point.

Source: DALL-E

It’s all narratives in economics

Narratives shape our world in economics, finance, and politics where we do not have physical laws or close-to physical laws that steer everything (a disclaimer: also for physical laws, there is a discussion on objectivism, but on a different level than for social sciences). By many economics and finance is approached as objective sciences governed by universal laws, economics and finance are, at their core, constructions: stories we tell ourselves to justify certain ways of living and organizing society. Recognizing this opens the door to new perspectives and, potentially, transformative change.

That is also why stories and narratives captured in the equation do not give the correct answers if the world changes. Amid the 2008 financial crisis, the macroeconomic DSGE model we utilised at Rabobank (NiGEM) proved rather ineffective. This model, calibrated and estimated using historical time series data, proved incapable of reproducing the financial crisis as a scenario. The same was held in 2020, at the onset of the COVID-19 crisis. Practitioner-economists relied solely on their practical and scientific comprehension of the economy. This is in a practitioner situation quite often what the business asks from a practitioner macro-economist: guide us and give direction in uncertain, complex times. We know that you also don’t know all the uncertainties, but with your economic background, we trust your judgement, right or wrong (and, of course, challenge you). Practitioners, policymakers such as central bankers or economists working at commercial banks such as I have to analyse and conclude daily: what do you expect from the development of interest rates or exchange rates? What do we expect from economic growth, house prices, and equity markets? Not as a kind of play, but because real-world decisions are based on those opinions: should we hedge a currency and go longer duration bonds? What will the probability of default or loss in the banking portfolio in a particular country be? Based on their analysis and judgement, academic research follows, often years later.

How, then, in the heat of the moment, do you judge if your judgements are integer? How do you judge if what you observe is not your reality but the relevant reality? Or, in other words, how do you separate your underlying beliefs from other possible interpretations? That is hard to judge. It is a challenge to circumvent your subjective judgement because you are called upon exactly to do just that. But how do we have a yardstick against biases? I have to admit, in practice, this is quite hard. Suppose I look back to the forecast I have made ‘in the heat of the moment’, e.g., during the financial crisis, the euro crisis, Covid-19 and the war between Ukraine and Russia. In that case, there are two biases for practitioner economists. One is the regression to the mean: you don’t want to be the economist betting entirely differently. Without clear guidance, you partly trust your model (which, as DSGE models, will always have a mean reversion) and look at other forecasters. The second bias is adaptive expectations: if you are severely negatively surprised by economic developments, you tend to be very pessimistic about the near future, underestimating rebound effects, policy reactions and the chance of positive surprises.

I can only say that I see a learning curve in these situations. In the last crisis, we self-corrected our negativity and came up with (looking back) better forecasts. Having enough (experienced) sparring partners, looking for historical parallels, and interpreting incoming data is the best you can do to avoid biases and maintain integrity. In the end, also a practitioner-economist must explain his or her assumptions and methodology, just like an academic researcher.

But the relevance of what economists, in this case, do is maybe not so much a forecast. It is foremost telling the most likely narrative relevant to what you analyse. It can not even be ruled out that economic narratives are partly self-fulling if we think that higher interest rates drive down inflation. If we observe higher interest rates, it might do so. Not through the channels we expect, but because people will anticipate.

Economics as a Storytelling Practice

In his book Narrative Economics, economics Nobel Laureate Robert Shiller explains how stories and conversations can lead to fundamental changes and even contribute to the behaviour of business cycles. Shiller argues that people’s financial behaviours, such as spending, saving, and investing, are influenced by emotional stories, leading to widespread social and economic impacts. He highlights how narratives have “gone viral” throughout history, driving phenomena like the 1920-21 Depression, the Great Depression, and the 2007-09 Great Recession. Shiller advocates for a formal study of these economic narratives, drawing on quantitative methods to better understand their effects and how they spread, akin to epidemics. Still, he also shows that narratives are not so familiar as a way of studying economics (see figure). He suggests that the contagious nature of economic stories warrants an approach in economics that examines these popular narratives and their influence on macroeconomic policies and crises.

Source: Shiller, 2017

For instance, what’s often seen as the inevitability of “economic growth” is one of many possible stories about value, progress, and success. Philosopher Jean-François Lyotard wrote in The Postmodern Condition that societies build legitimacy through “grand narratives”—overarching stories that explain, justify, and structure the world. Our grand narrative posits that perpetual growth and technological advancement are universal goods worth nearly any environmental or social cost. But like any narrative, it’s a story written by some for others, promoting specific values while silencing others.

This economic narrative frames what we deem possible and drives political decisions, market behaviours, and our moral compasses. When viewed through the lens of stories, we can ask: Is the growth narrative the best story we have for a sustainable, equitable future? Is it the best story for our economy embedded in nature and social relationships, and does it, above all, lead to a good life for all? Or is it time to embrace new narratives that confront and mitigate the ecological crises looming large in our world today?

Philosophers on Narratives and Reality

Philosophers have long debated the role of narratives in shaping our lives. In After Virtue, Alasdair MacIntyre argued that narratives are how we understand our lives, making sense of our actions within broader social contexts. Without a guiding story, he suggested, we lose the ability to discern what’s worth pursuing—a predicament we arguably face today in our pursuit of growth at all costs.

French philosopher Michel Foucault also explored how dominant narratives dictate societal norms, shaping institutions and behaviours. Foucault observed that power dynamics influence the creation and acceptance of “truths” and “realities.” In economics, for instance, the prevailing narrative that market forces can solve all problems is so entrenched that alternatives are often dismissed or outright ignored. This makes it all the more difficult to propose changes without destabilizing the “reality” built around this narrative.

As Canadian philosopher Charles Taylor observed, our “social imaginaries”—the collectively shared images and narratives that guide our practices—determine how we conceptualize ourselves and our place in the world. Today, the story of limitless growth and consumerism dominates this social imaginary, framing both our identities and our global impact.

New Narratives for a New Era: The Laudato Si’ and Saito’s Marx in the Anthropocene

So, let’s turn to some alternative narratives on economics for our time. A growing number of voices call for new narratives that challenge the status quo and support a shift toward sustainable, equitable living. Two notable contributions that I just read are Pope Francis’s Laudato Si’ and Kohei Saito’s Slowdown: A degrowth Manifesto.

In Laudato Si’, Pope Francis critiques the “technocratic paradigm” that treats nature as a mere resource for profit and exploitation.

“The technocratic paradigm also tends to dominate economic and political life. The economy accepts every advance in technology with a view to profit, without concern for its potentially negative impact on human beings. Finance overwhelms the real economy. The lessons of the global financial crisis have not been assimilated, and we are learning all too slowly the lessons of environmental deterioration. Some circles maintain that current economics and technology will solve all environmental problems, and argue, in popular and non-technical terms, that the problems of global hunger and poverty will be resolved simply by market growth.”

Source: Laudato Si’

His encyclical calls for a “culture of care,” urging us to see ourselves as interconnected with the Earth and responsible for its well-being. Another quote:

Love, overflowing with small gestures of mutual care, is also civic and political, and it makes itself felt in every action that seeks to build a better world. Love for society and commitment to the common good are outstanding expressions of a charity which affects not only relationships between individuals but also “macro-relationships, social, economic and political ones”

Source: Laudato Si’

“The time has come to pay renewed attention to reality and the limits it imposes,” he writes, emphasizing the need for a new narrative grounded in ecological responsibility and spiritual awareness. Francis’s message is a counter-narrative to growth at all costs, reminding us of humanity’s long-held wisdom about the need for ecological balance. Francis’s vision challenges us to see the Earth not as an asset but as a “common home” for which we share responsibility—a reframing crucial in a world increasingly scarred by environmental degradation.

Kohei Saito’s Slowdown: The Degrowth Manifesto builds on this by offering a fresh interpretation of Karl Marx’s Das Kapital, reframing it to address our modern ecological crisis. Saito argues that capitalism’s perpetual growth is fundamentally incompatible with environmental sustainability. This “anthropocentric” system prioritizes short-term profit, disregarding ecological limits, leading to a “metabolic rift” between humanity and nature. Saito’s manifesto contends that Marx’s critique of capitalism is as much about ecological alienation as it is about social inequality.

Where traditional interpretations of Marx emphasized economic injustice, Saito’s Slowdown positions Das Kapital as a cautionary tale against environmental ruin. Saito suggests that Marx foresaw the long-term consequences of growth-centered production—a warning ignored mainly in mainstream economic discourse. Saito’s reinterpretation calls for degrowth, advocating a controlled reduction of production and consumption to ensure ecological balance and reduce inequality. This is a profound shift: Das Kapital, in this context, becomes more than a critique of capitalism; it offers a blueprint for an alternative future.

Why We Need Better Narratives Now

As we confront mounting ecological and social challenges, our stories about progress, growth, and value matter more than ever. The prevailing growth-centered narrative leads us to consume at unsustainable rates, framing environmental exploitation as a necessary price for “progress.” However, as environmental catastrophes become more frequent, this story no longer serves us. As the Intergovernmental Panel on Climate Change (IPCC) has repeatedly stated, a transformation of “unprecedented” scale is required to avoid the worst effects of climate change. In weeks, many new climate reports in the run-up to COP29 don’t make it better. The latest UN Emission Gap Report has a title that says it all: No more hot air…please! It sounds pretty desperate.

I can put all the dramatic figures here, but they also made a short video with storytelling (narratives!). See below. Watch until the end; it only gets worse.

New narratives like these are crucial as we confront the escalating ecological crisis. Our current story—a growth-centric worldview where wealth creation takes precedence over environmental health—has led us to the brink of planetary collapse.

A shift in narrative won’t happen overnight, as philosopher Pierre Bourdieu’s concept of “habitus” helps explain. Our “habitus”—the ingrained habits and beliefs formed by societal structures—often reinforces the growth narrative by making it feel natural or inevitable. However, recognizing that stories, not immutable truths, maintain these structures offers an opening for change. The key is not to eradicate narratives but to replace them with ones that reflect our ecological and social reality.

Toward a Culture of Care and Balance

The stories we embrace shape our understanding of what’s possible and worth striving for. Narratives like Laudato Si’ and Slowdown offer blueprints for a world that values sufficiency, community, and a sustainable relationship with the planet. Pope Francis’s call for a “culture of care” asks us to view the planet as a living entity deserving of respect rather than as a resource to be exploited. Saito’s manifesto for degrowth suggests that prosperity doesn’t need to mean endless consumption but could mean more equitable access to resources within ecological limits.

These narratives may seem radical, but they are in many ways a return to longstanding wisdom, resonant with indigenous and spiritual traditions that have emphasized harmony with nature for centuries. As Pope Francis says in Laudato Si’, “Human beings, while capable of the worst, are also capable of rising above themselves, choosing again what is good.”

In the end, our future hinges on the stories we tell ourselves. Will we continue with a story of endless growth, or will we choose one of balance, responsibility, and care? Changing the narrative won’t solve all problems, but it’s the first step in creating a world where people and the planet can thrive.

That’s all.

Take care,

Hans