One Quarter of GDP Is Persuasion

Abstract

Economists view talk as cheap and culture as insignificant. Yet humans are talking animals, talking in their markets. The talk probably matters: why else would the human animals bother doing it? The usual economic view of the talk is that it issues orders and conveys information. Workers at GM are ordered to report for work tomorrow; credit ratings are conveyed. Economic analysis takes these parts of the talk into account without fuss. Production theory can be viewed as the theory of one mind issuing orders. Much of game theory is concerned in one way or another with information (though game theory, as Joseph Farrell (1995) and others have found, requires more than bits of information). But issuing the orders and conveying the information does not account for all of the talk. The third part of the economic talk is persuasion.

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