Abstract: This paper develops a canonical approach to incorporating narrative supply from politicians and narrative demand from voters into standard models of political competition.  In our framework, politicians deploy new narratives if these enhance their electoral chances, and voters adopt these narratives if this suits their interests, based on motivated reasoning. We apply this framework to study the rise of neoliberalism, based on a narrative that emphasises the trickle-down benefits of deregulation. We provide insights into why the neoliberal narrative gained political traction following the turbulence of the 1970s oil shocks, and how it evolved into a new consensus narrative, sometimes called the Third Way. Our framework shows how  temporary economic shocks can lead to a narrative dynamic that permanently alters policy choices.

for information patrizia.pellizzari@unibocconi.it