Narrative Entanglement

Abstract

Politicians rarely acknowledge trade-offs between a policy’s economic and non-economic effects. We show that incentives to suppress such trade-offs also generate narrative entanglement: a shock to one policy dimension leads politicians to update their whole narrative bundle, even on unrelated dimensions, which shapes equilibrium policy. We test our theory by analyzing all speeches from the 9th European Parliament (2019–2024) with LLMs. We find entangled narratives across different policy domains, and show that following Russia’s invasion of Ukraine politicians adjusted narratives on both the economic and environmental effects of climate policy, in line with our theory.