The human brain has always been highly tuned towards narratives, whether factual or not, to justify ongoing actions, even such basic actions as spending and investing. Stories motivate and connect activities to deeply felt values and needs.

It seems that the human mind strives to reach enduring understanding of events by forming them into a narrative that is imbedded in social interactions.

When in doubt as to how to behave in an ambiguous situation, people may think back to narratives and adopt a role as if acting in a play they have seen before. The narratives have the ability to produce social norms that partially govern our activities, including our economic actions.

Narrative Economics By Robert J. Shiller

More in this conversation with FT Robert Shiller: market narratives are ‘like diseases’