Wang's Law of Narrative Production: Endogenous Belief Formation, Capital Allocation, Job Creation, and Social Mobility via Entrepreneurial Narrative Density

Abstract

This paper proposes Wang's Law of Narrative Production: ceteris paribus, a one-standard-deviation increase in an economy's entrepreneurial narrative dissemination density generates systematic effects on aggregate consumption, employment, and social mobility. We endogenize "entrepreneurial narrative agents" (ENAs)—including entrepreneurship educators, motivational speakers, and business narrative producers—into the macroeconomy, conceptualizing narrative dissemination as a productive activity with its own production function and market equilibrium. We construct a continuous-time dynamic stochastic general equilibrium (DSGE) model with an endogenous narrative production sector and rigorously derive three core propositions: first, narrative production density systematically affects the direction and efficiency of capital allocation by altering the formation of entrepreneurial expectations; second, narrative dissemination generates a consumption multiplier effect through subjective wealth expectations that cannot be explained by the permanent income hypothesis; third, at the zero lower bound (ZLB), subsidies to the narrative production sector dominate equal-sized fiscal stimulus in welfare terms. We further extend the theoretical framework to incorporate job creation and social mobility: entrepreneurial narratives not only directly create jobs through new firm formation but also systematically reshape social class structure by altering household beliefs about upward mobility and thereby influencing human capital investment and occupational choice. We design three complementary causal identification strategies: (1) a difference-in-differences design exploiting China's 2014 "Mass Entrepreneurship and Innovation" policy; (2) an instrumental variables strategy exploiting the 1980 U.S. federal entrepreneurship education funding allocation; and (3) a synthetic control method exploiting Japan's "Lost Decades." We also propose a historical newspaper NLP content analysis scheme spanning 1929–2023 across countries to construct the entrepreneurial narrative density database. The core contribution of this paper is to elevate Shiller's (2017) narrative economics from a descriptive theory to a quantifiable, policy-actionable general equilibrium framework, and to introduce "narrative policy" (Narrative Policy) as a novel policy instrument that simultaneously manages aggregate demand, employment creation, and social mobility.