The recasting
Economic narratives function remarkably like what Freud called dream-work, the process by which unconscious material is transformed into the manifest content of dreams through mechanisms of displacement, condensation, and symbolization. Just as dreams allow forbidden wishes to find disguised expression, economic narratives permit societies to maintain contradictory beliefs and unsustainable practices by transforming threatening realities into acceptable stories. The pervasive narrative of ‘green growth’, for instance, allows continued capital accumulation while displacing anxiety about ecological limits onto fantasies of technological salvation.
Consider how displacement operates in policy discourse. When central banks speak of ‘financial stability’ or ‘systemic risk’, they displace attention from the fundamental instability of leveraged speculation onto technical management problems. The 2008 crisis was preceded by extensive discussion of ‘risk management’ and ‘financial innovation’, terms that displaced recognition of basic overleveraging onto reassuring technical vocabulary. As Shiller (2019) demonstrates, stories, spread through economic systems with their own epidemic dynamics, but psychoanalysis reveals these are not neutral information transmissions but defensive operations protecting against unbearable recognitions.
Condensation, the compression of multiple meanings into single symbols, appears throughout economic discourse. The term ‘growth’ condenses fantasies of progress, fears of stagnation, competitive anxieties, and ecological denial into a single metric that becomes unquestionable. When policymakers declare that ‘we must restore growth’, they mobilize this condensed symbolic power without examining what drives the compulsion for endless expansion. Similarly, ‘inflation’ condenses anxieties about value, stability, and social order into a single number that becomes the focus of obsessive management while its symptomatic meaning remains unexplored.
Denial, the most primitive defence mechanism, structures entire policy frameworks. The efficient markets hypothesis itself functions as systematic denial of the unconscious processes driving market dynamics. More recently, Modern Monetary Theory (MMT)’s claim that sovereign currency issuers face no financial constraints represents denial taken to its logical extreme, the fantasy of unlimited monetary power unconstrained by material reality. While MMT correctly identifies the conventional nature of fiscal constraints, it denies the psychological limits to monetary authority, the point at which
symbolic credit collapses into…worthlessness.The concept of ‘forward guidance’ in monetary policy exemplifies how economic narratives attempt to manage not just expectations but anxiety itself. Central banks promise to keep interest rates ‘lower for longer’ or maintain stimulus ‘until conditions improve’, offering reassurance that paternal authority remains in control. Yet as Braun (2016) argues, central bank communication increasingly resembles what psychoanalysis calls ‘empty speech’, signifiers that circle around a void without addressing the fundamental uncertainties they purport to manage. The more central banks talk, the more apparent becomes their inability to guarantee the stability they promise.
But just what does this mean for actual policy?
Recognizing the unconscious dimensions of economic life transforms how we understand policy intervention. Central banks and fiscal authorities do not simply optimize economic variables; they manage collective psychological processes through symbolic intervention. This shifts focus from technical calibration to what we might call economic analysis, working through collective resistances and repressions.
Central banks function less as optimizing agents than as institutional analysands, compulsively repeating policies despite their manifest failure. The Bank of Japan’s three decades of zero interest rates, producing neither inflation nor robust growth, exemplifies repetition compulsion at the institutional level. Each new governor promises fresh approaches yet implements variations of the same policies, unable to work through the trauma of the bubble economy’s collapse. Breaking such repetition requires not better models but institutional analysis, bringing to consciousness the unconscious fantasies driving policy.
Modern central banking increasingly involves managing transference rather than managing expectations. Forward guidance attempts to shape not just rational forecasts but unconscious fantasies about institutional omnipotence. When the European Central Bank promises to do ‘whatever it takes’, it offers not credible commitment in the game-theoretic sense but transferential reassurance, performing the role of powerful parent who will not allow catastrophic abandonment. The effectiveness of such interventions depends not on their technical credibility but on their capacity to contain unconscious anxiety.
This reveals the impossibility of purely technical solutions to economic problems. Every technical intervention carries symbolic meaning that shapes its effectiveness. Quantitative easing was initially presented as temporary emergency response but became permanent because its withdrawal threatened not just asset prices but the fantasy of unlimited monetary support. . . .
Ceyhun Elgin (2026). “The economic unconscious: Towards a psychoanalytic macroeconomics.” Cambridge Journal of Economics, 1–23 (accessed online at https://academic.oup.com/cje/advance-article/doi/10.1093/cje/beag032/9002026; my bold)
