The Dow falls, fantasies follow

The Dow goes down, and everyone asks why? Was it about the Chinese economy? An impending recession? The price of oil? Does anyone really know? Probably not, but that won’t stop people from telling stories that purport to explain — and some that throw fuel on the fire.

Do you find these stories as annoying as I do? Even when I know nothing of the reasons or even many of the facts, I just listen and moan. So often they have as much to do with the real cause as a cave man’s stories did about angry spirits and lightning.

Just one of these stories could be Exhibit A in the trial of the data analyst who failed to learn storytelling: You observed this behavior — the unconscious eruption of stories to explain data — yet you failed to fill in with your own story, a story based on careful analysis. You insisted that the data spoke for itself.

False stories — what brings to my mind the “angry spirits” variety of explanation — have real, sometimes longlasting effects. This week in the New York Times, Yale professor of economics Robert J. Shiller explained how these fantasies cascade from one decision to the next. There’s the one about the rise of stock values from 2009 to 2014 and the “supposed unwinding this year.”

This is not just a story about numbers: It too is a human interest story, one in which many investors missed a huge profit opportunity. They missed it because they overreacted to the 2008 financial crisis and became too fearful to stay in the market. This tale focuses on the success of market believers, who were wonderfully rewarded for their prescience. As I pointed out in a column in August, the popularity of this narrative led to a situation in which many people became aware that the market has gone up enormously, and it has most likely heightened sensitivity to the possibility of human fallibility and of correction now that the market has been dropping.

Most economists generally do not refer to such popular stories or assess their emotional appeal. The same is true for most historians, but the Yale historian Ramsay MacMullen is something of an exception. In his remarkable book, “Feelings in History: Ancient and Modern” (Regina Books, 2003), he wrote: “History is feeling. It is feelings that make us do what we do; and feelings can in fact be read. But the reading of them requires writers and readers to join their minds in ways that have long been out of fashion among students of history.”

On the supposed significance of the Dow’s fall during the new year’s first week.

Another current focus is the fact that this year set a record for poor performance of the stock market in the first week of the year. That timing has given the market-decline story wings, though there is really nothing special about such timing. After all, the date of the new year is an arbitrary social convention. There’s a Western Christian New Year, an Orthodox New Year, a Jewish New Year, an Islamic New Year, a Chinese New Year and so forth. The prominence of the Western year in global calendars reflects a history of Western dominance, and that has given the new year the ability to spark stories that evoke mixed, and changing, feelings.

Students of data should also try “reading” those feelings in the stories told by people around them. They might then sieze the moment and tell their own stories — based on a rigorous interpretation of the data and solid reasoning.

I admit, though, that angry spirits are more fun.

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