The political scientist Henry Farrell has explored unconventional behaviour in the seemingly unlikely context of the personal grooming of hipsters – analysing a debate between economist Paul Krugman and journalist Ezra Klein about the purpose of tattoos versus topknots.24 A hipster’s topknot is not a costly action – it is easy to do and to remove – so, in strategic terms, members of a group of top-knotted hipsters will not interpret your top-knot as a credible signal of a strong affinity. If you want to send a costly – and therefore more credible – signal to other rebels and minority groups that you are sincere about joining, then a tattoo is more convincing because it is not ‘cheap talk’. You show others that you are serious by going through painful actions at significant personal cost to yourself. Farrell links this to sociologist Diego Gambetta’s insights in Codes of the Underworld, his study of how criminals communicate with each other: ‘Erefaan’s face is covered in tattoos. “Spit on my grave” is tattooed across his forehead; “I hate you, Mum” etched on his left cheek.’ Permanent facial tattoos are outwardly unconventional actions but they are costly and therefore a much more credible signal of commitment, essential to acceptance by specific rebel groups. ‘The tattoos are an expression of loyalty . . . you are marked, indelibly, for life. Facial tattoos are the ultimate abandonment of all hope of a life outside.’25
Initiation rites and frat house ‘hazing’ serve similar purposes. On the surface, these behaviours seem perverse and ultimately contrarian, but if people are using unconventional behaviours as a way to build alliances with groups whose identity they would like to share, then this makes much more sense. Defying social norms is sometimes consistent with self-interested herding. If a self-interested rebel has much to gain personally from joining a group of like-minded rebels, then it pays for them to incur costs to imitate the other copycats within the rebel herd.
Signalling is not just directed at the groups we wish to join. We also signal our virtues as well as our status. Car choices are a classic example of the ways in which we use different signals. A person who buys a Maserati is signalling status, and it works because they are imitating others before them who have signalled status in the same way. An environmentalist who buys no car at all may be signalling to other environmentalists that they share with them a virtuous regard for the environment.26 This social signalling operates at all levels of society. One research study explored the behaviour of poor families lacking the money to pay for basic foodstuffs. When they were given additional income, they spent it on consumer goods such as TVs even though their families were malnourished.27 This is not necessarily irrational. We live and work in social groups, and if we are to survive and prosper in these groups we need to attract the respect of the rest of the herd. If others are impressed by our standard of living, then our lives might be easier.28
Conformity also has a value that connects with our social rankings. The economist B. Douglas Bernheim has explored the ways in which status encourages conformity with the group from the perspective of a selfish individual maximising their own utility. At a social level, status is important and improves people’s satisfaction. Being ostracised for departing from conventions and social norms will threaten our status, and so fads and customs will persist for longer than they are useful. Self-interested copycats recognise the negative consequences of deviations from social norms and, conscious of what they will suffer from rebellion, they conform and follow a herd.29
Reputation
Signalling connects closely with reputation, although signalling is a more ephemeral phenomenon and reputation is something we are all keen to build over time. A good reputation has value, both tangibly and intangibly. Reputations are more vulnerable in today’s digital age. We might hesitate to reveal our Saturday-night excesses on Facebook and other social media sites were we to consider the potential impacts on our future reputations, for example when looking for a job. We take fewer risks with our reputation when we are following others around us. The economist John Maynard Keynes is famous for observing this: ‘Worldly wisdom teaches that it is better for reputation to fail conventionally than to succeed unconventionally.’30 In the modern world, rogue traders are an example of the vulnerability of a reputation built on contrarian choices. Spectacular gains can be made when a trader bids against financial market conventions. But when the crowd is right and the contrarian is wrong, reputation cannot so easily be saved. Contrarian traders cannot simply defend themselves by arguing that their mistake was a common one.
In the business world, firms that value their good reputation can be steered towards better behaviours overall, and firms will follow other firms in adopting best practices. Business corporations’ preoccupation with fairness and legal and ethical requirements is not driven by altruism, however, but rather reflects an enlightened self-interest. Corporate management teams realise that their business is more likely to survive if they have a good reputation. An example of how these influences might gain traction is in firms’ approaches to environmental policy. Corporations can build market share by signalling to the world that they are ‘good’ and that consumers should therefore support their products. When the US Chamber of Commerce opposed climate-change mitigation policies in 2009, a series of resignations by executives from Apple, Nike, Pacific Gas and Electric, Exelon and PNM Resources followed.31 Conversely, companies have been vilified for not paying enough taxes. If a herd of consumers is large enough, it can effectively pressure companies into wide-scale changes in commercial practices and partnerships. In the aftermath of numerous school shootings, finally catalysed by those in Florida in February 2018, a variegated herd of businesses – from car hire businesses Hertz and Avis through to key-maker Chubb and the First National Bank of Omaha – acted in defiance of the politically powerful National Rifle Association. They removed various deals and privileges for NRA customers, a response to widespread pressure from anti-gun protesters.32
In the context of environmental strategies, corporations build their reputations through their corporate social responsibility programmes. These often include commitments around environmental responsibility, partly as a response to consumer pressure and corporate concerns about keeping their customers happy by behaving in ways that consumers think is fair and principled. The corporation’s wider reputation, including with investors and competitors, will also play a role.33 So, reputational concerns can encourage corporations into more environmentally sustainable and innovative methods of production. Corporations may compete for reputation – especially if information about firms’ environmental records is made more easily available to the public, as with environmental blacklists. One example is the Toxics Release Inventory in the US, which acted as a form of social signal. It helped consumers learn about different firms’ environmental records so that they could discriminate in favour of those with good environmental practices. This links with the push for a ‘Greenhouse Gas Inventory’, as advocated by Richard Thaler and Cass Sunstein in their bestselling book Nudge. Thaler and Sunstein explain that policymakers can use social influences to ‘nudge’ consumers and firms in a better direction. The essence of nudges is that they are little pushes in the right direction. They are a form of what Thaler and Sunstein call libertarian paternalism. They are libertarian in that individuals are still able to choose for themselves. Nudges are not sanctions and they do not impose direct costs on the individual, as taxes would. People can ignore the nudge if they want to. But nudges are also paternalistic because they are designed and implemented by policymakers to achieve publicly desirable outcomes. If well designed, people will use nudges as a signal helping them to decide what is the best strategy for them and others around them. Social nudges are a common form of policy used in the energy and environmental sector – and we shall see a few examples throughout this book. If significant emitters were obliged to disclose emissions levels via a Greenhouse Gas Inventory, then they would be revealing information to their customers. Benefits ensue, not only in terms of making relevant informat
ion more transparent for environmental regulators, but also via consumer pressure. Consumers concerned about climate change will have information about the worst emitters and will pressure those firms into reducing emissions. In an age when online social media are ubiquitous and powerful, bad publicity spreads quickly. It damages relationships with competitors and investors, as well as with customers.34 So the self-interested directors and managers of commercial firms have reasons to imitate other firms’ best practices if this helps them to build their corporate reputations.
Power and safety
Another motivation for self-interested herding is the power that the individual can gain from joining a group. Collective action is, in many important contexts, more powerful than individual action.35 Groups can give individuals security, especially when they provide safety in numbers. For example, the herd protects pedestrians when they are crossing busy roads. If you have ever been in an overcrowded city such as Jakarta, especially as a stranger, you may have been disconcerted at the thought of crossing congested main roads jammed with cars and motorbikes. The less you know about a city the harder it is to resolve your problem because your trust in local drivers may be limited, or you may know less about the city’s traffic rules and driving conventions. What is the best strategy for getting where you want to go? The quickest way might be to move with a group of locals because you are learning by observing the local pedestrians’ habits. You will also enjoy safety and shelter from harm by belonging to a larger group. A car is far more likely to run over a lone pedestrian than a crowd. A negative consequence of this grouping behaviour is that an extremist contrarian wanting to attack a crowd violently can succeed more easily when we herd together, with severe consequences. The truck and van attacks perpetrated by terrorists across Europe and in New York in 2017 depressingly illustrate that the crowd is not always a safe place to be.
Beyond physical safety, in our civil lives there are corollaries of the advantages we gain from joining groups and herds. Groups have much more political clout and influence than individuals. With class action suits, for example, otherwise powerless individuals can leverage group power to get justice for themselves. Many class action suits relate to illnesses and deaths caused by harmful chemicals. One example is the case of the ‘fen-phen’ drug (a diet pill made by mixing the appetite suppressant fenfluramine and the stimulant amphetamine phentermine). These were marketed by the American Home Products Corporation (now Wyeth) and had been prescribed by a range of medical practitioners before being withdrawn by the US Food and Drug Administration in 1997, when scientists found that the use of fen-phen was associated with side-effects including hypertension and heart valve damage. The thousands of users of the diet pills who had suffered the side-effects came together and, in 1999, the American Home Products Corporation agreed to pay the plaintiffs a total of $3.75 billion. This was not the only legal action, and Wyeth was later forced to set aside $16.6 billion to cover its fen-phen liabilities.36 The plaintiffs’ choice to join with others in the legal action was a rational, self-interested choice from each individual plaintiff’s perspective. Self-interested herding alongside others suffering similar disadvantages gave power to the individual plaintiffs. They would have had no power at all if they had acted alone.
A key limitation of the economic approaches to copycats and contrarians highlighted in this chapter is that they are founded on a fundamental belief in individuals’ capacity for logical, rational decision-making. The Bayesian calculations forming the foundation of information cascade models are simpler than the complex mathematical calculations embedded in many economic models. Even so, Bayesian models cannot capture complex sociopsychological influences. Bikhchandani and his colleagues have acknowledged that, although their economic model of herding as an information cascade captures the fragility of herding in a simple setting, it cannot explain why mass behaviour in the real world is fragile. Their models cannot explain why changes in social and political attitudes are sometimes so unstable, for example in the context of changing attitudes towards lifestyle choices such as cohabitation, sexuality, communism and addiction.37 To be capable of Bayesian reasoning humans would have to have relatively high levels of numeracy and logical capacity, when in reality most of us do not think in such sophisticated ways.38
Reflecting on all these different explanations for self-interested herding, economists tend to rely on the idea that humans are good at mathematical reasoning. But have humans really evolved the ability to effectively apply high levels of numeracy and sophisticated probabilistic reasoning? The capacity for complex and abstract mathematical calculation would not obviously have bestowed evolutionary advantage in hunter-gatherer settings, and so it is hard to imagine where such high levels of numeracy might come from. Another problem with economic models of self-interested herding is that they tend to start from the perspective of the individual decision-makers and the incentives and motivations driving them. Yet herding may be a product of forces not easy to understand from an individual’s perspective. What is rational for the group is not necessarily rational for the individual, and vice versa.
Moving beyond economics, other social sciences have developed a wider understanding of the social influences driving our behaviour. We are susceptible not only to the less obviously rational elements associated with emotions and personality traits, but also to losing our individual identities when forming part of a group or herd with a powerful identity of its own. All these insights can help us to understand herding as a collective phenomenon, explicable in terms of sociological and psychological forces, as we shall see in the next chapter.
2
Mob psychology
How and why would a group of close on 900 people collectively decide to collaborate in a mass murder-suicide pact? These were compelling questions in the aftermath of a terrifying massacre which took place in Guyana in 1978. Jim Jones, the founder and self-proclaimed ‘Father’ of the Peoples [sic] Temple of the Disciples of Christ, persuaded the members of his cult first to assassinate an American congressman, some journalists and a cult defector, and then to turn the metaphorical gun on themselves. Parents poisoned their children with cyanide-laced fruit drinks, and then killed themselves with a communally produced cocktail of cyanide and sedatives. Jim Jones shot himself on the same day.1
Most of us would find it hard to imagine how individuals could be manipulated into perpetrating such extreme and violent acts en masse. Jones had founded the Peoples Temple in 1955 in Indiana, blending Christian and socialist principles to further the cause of communism. The cult grew and moved to California, but in the early 1970s became the target of a series of exposés documenting abuse and exploitation within the cult. In 1974, Jones left to found ‘Jonestown’, seemingly as a socialist community agricultural project. He was joined by many members of the cult, yet, just four years later, they cut short their new lives in the ‘revolutionary’ self-slaughter – ostensibly voluntarily.
Why did so many otherwise conventional and law-abiding individuals allow themselves to be manipulated by one man? That is a question asked in relation not only to horrific isolated instances of violence such as the Jonestown massacre, but also more widely, across history. In the context of atrocities committed before and during the Second World War, many social scientists have hypothesised how and why large numbers of ordinary people not only stood by as passive observers, but also actively participated in the atrocities perpetrated during the Holocaust. Nor are such extreme levels of prejudice and violence a historical anomaly. As explored in later chapters, other studies in social psychology look at destructive, violent behaviours driven by social influences – specifically many people’s unhesitating tendency to obey authority figures. Otherwise ordinary people can be encouraged by their leaders to commit cruel acts including administering extreme electric shocks and other forms of inhumane treatment.2 These behaviours are all but impossible to explain using standard economic models in which people sensibly herd together as rational, self-contained
and selfish individuals. Actual human experience is much messier, and abstract economic models are not well designed to describe all the real world’s social and psychological complexities. In this chapter, we shall go beyond the ordered world of economics to explore insights about copycats and contrarians from the other social sciences, focusing on social psychology and sociology.
Collective herding and the wisdom of crowds
In the previous chapter, we saw how economists analyse herding as a clever strategy. Self-interested herding may create problems for groups, economies and societies at large; but from each individual’s economic perspective, following others is often a sensible strategy. A quite different type of herding is collective herding. Collective herding is not about the wants and needs of self-interested individuals. It is about the motivations and goals driving the group as a whole. Groups often form their own independent entity in a way which is impossible to explain from the perspective of a single individual.
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