Copycats and Contrarians

by Michelle Baddeley

  We also need policies that effectively balance conformity and dissent.6 To overcome the loss of private information incurred from our ingrained tendencies to follow others, one policy solution would be to ensure that better information and better education make us less dependent on others’ opinions. For example, robust education and information campaigns could be introduced by impartial organisations, designed to help all voters understand the economic, political and legal institutions in which we live. Then, politicians would not be so easily able to hoodwink voters into believing unrealistic manifesto pledges, economic pronouncements and other political promises.

  This book has explored the myriad ways in which our instincts, whether to imitate or rebel, affect our everyday lives. Is herding good for us as individuals? Is it good for society at large? Whether or not we decide that herding is desirable will depend on whether we take the perspective of the individual or society as a whole. Economic theory shows that herding often works well enough from the perspective of a self-interested copycat. Given market and institutional failures, individuals have rational reasons to collaborate, to look to the group, to copy and to herd – by observing and learning from watching others, by joining clubs and teams. From the perspective of groups and the human species, however, the benefits are less clear and will depend on context. The individual is sometimes dispensable to the group’s interest. A blind instinct to join the group, to obey wrong-headed orders or to engage in acts of self-destruction such as self-mutilation, suicide bombing or self-sacrifice in wartime are all behaviours that prioritise one group over another, exacerbating inter-group tensions.

  If we can develop a better understanding of the complex social interactions driving copycats and contrarians, then we will be better able to identify solutions to moderate herding and anti-herding when they are problematic, as well as to encourage herding and anti-herding when they are beneficial. But today’s world is characterised by a potentially destructive imbalance. Our evolved natures, modern institutions, tribal politics, globalised markets and cutting-edge technologies have all allowed copycats and their leaders to thrive whilst contrarians and mavericks are marginalised. If we are to prevent a dystopian future dominated by groupthink, echo chambers, intolerance, inequality and conflict then we need to celebrate the best of what is unconventional, rebalancing our world so that copycats and contrarians can thrive together in tomorrow’s world.

  Endnotes

  Introduction

  1. Oliver Milman (2015), ‘Cane Toad Sausages on Menu in Attempt to Save Kimberley’s Northern Quolls’, Guardian, 20 September. https://www.theguardian.com/australia-news/2015/sep/10/cane-toad-sausages-on-menu-in-attempt-to-save-kimberleys-northern-quolls; Angela Heathcote (2017), ‘Toad Sausages are Saving Our Quolls’, Australian Geographic, 31 August. http://www.australiangeographic.com.au/topics/wildlife/2017/08/toad-sausages-are-saving-our-quolls. See also Jonathan Webb, Sarah Legge, Katherine Tuft, Teigan Cremona and Caitlin Austin (2015), ‘Can We Mitigate Cane Toad Impacts on Northern Quolls?’, Charles Darwin University. http://www.nespnorthern.edu.au/wp-content/uploads/2015/10/4.1.35_can_we_mitigate_cane_toad_impacts_on_northern_quolls_-_final_report.pdf (accessed 30 September 2017).

  2. The first use of the term ‘anti-herding’ I can find was by economists Canice Prendergast and Lars Stole, who used it to capture contrarians building reputation. See Canice Prendergast and Lars Stole (1996), ‘Impetuous Youngsters and Jaded Old-Timers: Acquiring a Reputation for Learning’, Journal of Political Economy 104(6), pp. 1105–34. Since then, the mentions of herding in the academic literature overwhelm the mentions of anti-herding by many orders of magnitude.

  3. Liz Connor (2017), ‘British People Display Amazing Queue Etiquette Without Being Told’, Evening Standard, 2 May. https://www.standard.co.uk/lifestyle/london-life/british-people-display-amazing-queuing-etiquette-without-being-told-a3528366.html (accessed 5 September 2017).

  1 Clever copying

  1. Gary S. Becker (1976), The Economic Approach to Human Behavior, University of Chicago Press. These basic principles of rational choice have also been popularised in general-audience books such as Steven E. Landsburg (1995/2012), The Armchair Economist: Economics and Everyday Life, New York: Free Press, and Steven D. Levitt and Stephen J. Dubner (2007), Freakonomics: A Rogue Economist Explores the Hidden Side of Everything, London: Penguin Books.

  2. Gary S. Becker (1974), ‘A Theory of Social Interactions’, Journal of Political Economy 82(6), pp. 1063–93.

  3. Neoclassical economics is the dominant, but controversial, paradigm in modern mainstream economics and is based around the idea that free markets are the best institutions for ensuring human welfare. Vilfredo Pareto is less well known, at least amongst mainstream economists, for his sociological insights; for example, see Vilfredo Pareto (1935), The Mind and Society [Trattato di Sociologia Generale], trans. Arthur Livingston, New York: Harcourt, Brace and Company.

  4. Vilfredo Pareto (1906/1980), Manual of Political Economy, trans. A.S. Schweir, New York: Augustus M. Kelley. For a history of the term, see also J. Persky (1995), ‘Retrospectives: The Ethology of Homo economicus’, Journal of Economic Perspectives 9(2), pp. 221–31.

  5. Adam Smith (1776), An Inquiry in the Nature and Causes of the Wealth of Nations, Book I, ch. II, pp. 26–7.

  6. For a technical survey of economic theories of herding, see Christophe P. Chamley (2003), Rational Herds: Economic Models of Social Learning, Cambridge University Press.

  7. Sushil Bikhchandani, David Hirshleifer and Ivo Welch (1992), ‘A Theory of Fads, Fashion, Custom, and Cultural Change as Informational Cascades’, Journal of Political Economy 100(5), pp. 992–1026; Sushil Bikhchandani, David Hirshleifer and Ivo Welch (1998), ‘Learning from the Behavior of Others: Conformity, Fads, and Informational Cascades’, Journal of Economic Perspectives 12(3), pp. 151–70.

  8. Bikchandani, Hirshleifer and Welch (1992), p. 994.

  9. Abhijit Banerjee (1992), ‘A Simple Model of Herd Behavior’, Quarterly Journal of Economics 107(3), pp. 797–817.

  10. There are other explanations for crowded versus empty restaurants, built around economic assumptions of rationality, for example Gary S. Becker (1991), ‘A Note on Restaurant Pricing and Other Examples of Social Influences on Price’, Journal of Political Economy 99(5), pp. 1109–16. Essentially, Becker explains the crowded restaurant phenomenon in terms of the impact of one person’s consumption on another’s person’s demand: one person choosing a restaurant will increase other people’s demand for that restaurant, and so restaurant queues will grow.

  11. Thomas Bayes (1763), ‘An essay towards solving a problem in the doctrine of chances – communicated by Mr Price, in a letter to John Canton’, Philosophical Transactions of the Royal Society 53, pp. 370–418.

  12. This sort of evidence has an advantage over laboratory experiments because experimenters are not forcing experimental conditions on people. People can make their decisions naturally, and, because these decisions are not the product of experimental interventions, observed behaviours are more likely to be robust, and not an experimental artefact,

  13. Arthur Fishman and Uri Gneezy (2011), ‘A Field Study of Social Learning’, Bar Ilan University Working Paper, 29 April. https://www.biu.ac.il/soc/ec/fishman/wp/A%20field%20study%20of%20Social%20Learning.pdf (accessed 30 October 2017).

  14. Charles Holt (2006), Markets, Games and Strategic Behavior, Boston, MA: Pearson/Addison-Wesley.

  15. Lisa R. Anderson and Charles A. Holt (1996), ‘Classroom Games: Information Cascades’, Journal of Economic Perspectives 10(4), pp. 187–93; Lisa R. Anderson and Charles Holt (1997), ‘Information Cascades in the Laboratory’, American Economic Review 87(5), pp. 847–62.

  16. Anderson and Holt do not explain why they think students would be capable of Bayesian reasoning. Did they think that the students knew Bayesian probability so well that they could easily and quickly apply it to the experiment? Probably not. It is more likely that the experimenters assumed that the students
were acting as if they could do Bayesian calculations. Other economists describing similarly sophisticated decision-making often revert to the analogy used by Milton Friedman, one of the founding fathers of liberal economics, and his colleague Leonard Savage: expert billiard players are very good at manipulating the trajectories of balls around a billiard table; they play billiards as if they have a deep knowledge of the laws of mechanics, even though it is unlikely that they really do have such a sophisticated understanding. There are heated debates about whether this is a justifiable defence of unrealistic assumption, which we will not rehearse here. Suffice it to say that it is possible that our brains have evolved to have the capacity to make Bayesian calculations automatically without us having to think too hard about it. See Milton Friedman and Leonard J. Savage (1948), ‘The Utility Analysis of Choices Involving Risk’, Journal of Political Economy LVI, p. 298.

  17. Economists Erik Eyster and Matthew Rabin have explored the idea that imitation and herding can be irrational because a rational agent will see that the beliefs of others are correlated, and will take this correlation into account. These rational agents will ‘anti-imitate’ some of those that they observe. Alternatively, they will realise that they should follow all those in the queue ahead of them as if they were one person, and essentially interpret their behaviour as one social signal, not many. See Erik Eyster and Matthew Rabin (2014), ‘Extensive Imitation is Irrational and Harmful’, Quarterly Journal of Economics 129(4), pp. 1861–98.

  18. Banerjee (1992).

  19. Other economists have analysed the problems of herding in an uncertain world. For example see Ignacio Monzón (2017), ‘Aggregate Uncertainty Can Lead to Incorrect Herds’, American Economic Journal: Microeconomics 9(2), pp. 295–314.

  20. For introductions to the game theory literature see Ken Binmore (2007), Game Theory: A Very Short Introduction, Oxford University Press, and David M. Kreps (1999), Game Theory and Economic Modelling, Oxford University Press. The seminal but esoteric economic text is John von Neumann and Oskar Morgenstern (1944), The Theory of Games and Economic Behavior, Princeton University Press.

  21. Cited in Brian Skyrms and U.C. Irvine (2001), ‘The Stag Hunt’, Proceedings and Addresses of the American Philosophical Association 75(2), pp. 31–41.

  22. See also Desmond Morris on social signalling as part of our search for meaning (linking to identity and a need to belong); for example Desmond Morris (1969/1994), The Human Zoo, New York: Vintage.

  23. George A. Akerlof and Rachel E. Kranton (2000), ‘Economics and Identity’, Quarterly Journal of Economics 115(3), pp. 715–53. See also George A. Akerlof and Rachel E. Kranton (2011), Identity Economics: How Our Identities Shape Our Work, Wages, and Well-Being, Princeton University Press.

  24. Henry Farrell (2015), ‘With Your Tattoos and Topknots, Who Do You Think You Are?’, Washington Post, 28 July. https://www.washingtonpost.com/news/monkey-cage/wp/2015/07/28/with-your-tattoos-and-topknots-who-do-you-think-you-are/ (accessed 7 September 2017).

  25. Diego Gambetta (2009), Codes of the Underworld: How Criminals Communicate, Princeton University Press.

  26. For more on virtue signalling, see James Bartholomew (2015), ‘The Awful Rise of “Virtue Signalling”’, Spectator, 18 April. https://www.spectator.co.uk/2015/04/hating-the-daily-mail-is-a-substitute-for-doing-good/ (accessed 7 September 2017).

  27. Naimil Shah (2016), ‘Why Poor People Buy TVs’, Medium, 22 October. https://medium.com/@naimilshah/why-poor-people-buy-televisions (accessed 14 September 2017).

  28. See also the economist Harvey Leibenstein on how self-interested herding emerges in the context of consumer choice: Harvey Leibenstein (1950), ‘Bandwagon, Snob, and Veblen Effects in the Theory of Consumers’ Demand’, Quarterly Journal of Economics 64(2), pp. 183–207.

  29. B. Douglas Bernheim (1994), ‘A Theory of Conformity’, Journal of Political Economy 102(5), pp. 841–77.

  30. John Maynard Keynes (1936), The General Theory of Employment, Interest and Money, London: Macmillan and the Royal Economic Society, p. 158.

  31. O. Johansson-Stenman and J. Konow (2010), ‘Fair Air: Distributive Justice and Environmental Economics’, Environmental Resource Economics 46(2), pp. 147–66, and G. Brown and D.A. Hagen (2010), ‘Behavioral Economics and the Environment’, Environmental Resource Economics 46(2), pp. 139–46.

  32. ‘Shot? The National Rifle Association’, The Economist Espresso, 28 February 2018. https://espresso.economist.com/2e7fc7cb9bf8baacf29f1b7286976f53 (accessed 6 March 2018).

  33. D. Kahneman, J.L. Knetsch and R.H. Thaler (1986), ‘Anomalies: The Endowment Effect, Loss Aversion, and Status Quo Bias’, American Economic Review 5(1), pp. 193–206.

  34. Richard Thaler and Cass Sunstein (2008), Nudge: Improving Decisions about Health, Wealth, and Happiness, New Haven and London: Yale University Press.

  35. For some early and profound insights, see Mancur Olson (1965/1971), The Logic of Collective Action, Cambridge, MA: Harvard University Press.

  36. David J. Morrow (1999), ‘Fen-Phen Maker to Pay Billions in Settlement of Diet-Injury Cases’, New York Times, 8 October, and Bloomberg News reporting in the New York Times ‘Wyeth in Settlement Talks Over Diet Drugs’, 19 January 2005. http://www.nytimes.com/1999/10/08/business/fen-phen-maker-to-pay-billions-in-settlement-of-diet-injury-cases.html (accessed 23 October 2017).

  37. Bikhchandani, Hirshleifer and Welch (1992, 1998).

  38. See Gerd Gigerenzer and Ulrich Hoffrage (1995), ‘How to Improve Bayesian Reasoning Without Instruction: Frequency Formats’, Psychological Review 102(4), pp. 684–704. For a survey of insights around the limits on Bayesian reasoning in humans, see Michelle Baddeley, Andrew Curtis and Rachel Wood (2004), ‘An Introduction to Prior Information Derived from Probabilistic Judgments: Elicitation of Knowledge, Cognitive Bias and Herding’, in Geological Prior Information: Informing Science and Engineering, ed. A. Curtis and R. Wood, Geological Society, London, Special Publications 239, pp. 15–27.

  2 Mob psychology

  1. George Klineman (1980), The Cult That Died: The Tragedy of Jim Jones and the Peoples Temple, New York: Putman Publishing Group; Tim Reiterman with John Jacobs (2008), Raven: The Untold Story of the Rev. Jim Jones and His People, New York: Penguin Books; https://en.wikipedia.org/wiki/Peoples_Temple (accessed 8 March 2017).

  2. See Stanley Milgram (1963), ‘Behavioral Study of Obedience’, Journal of Abnormal Psychology 67, pp. 371–8; and Craig Haney, Curtis Banks and Philip Zimbardo (1973), ‘A Study of Prisoners and Guards in a Simulated Prison’, Naval Research Review 30, pp. 4–17.

  3. For a comprehensive survey of this literature, see James Surowiecki (2004), The Wisdom of Crowds: Why the Many Are Smarter Than the Few, London: Abacus.

  4. There is no complete English translation of the primary source: Marquis de Condorcet (1785), Essay on the Application of Analysis to the Probability of Majority Decisions. For a modern interpretation, see Krishna K. Ladha (1995), ‘Information Pooling Through Majority-Rule Voting’, Journal of Economic Behavior and Organization 26(3), pp. 353–72.

  5. See https://www.ara.com/projects/aces-crowd-based-forecasting-world-events (accessed 23 October 2017).

  6. David V. Budescu and Eva Chen (2015), ‘Identifying Expertise to Extract the Wisdom of Crowds’, Management Science 61(2), pp. 267–80.

  7. While until recently emotions have been largely neglected in economics, Jon Elster has written extensively on how emotions can be brought into economic analyses; see for example Jon Elster (1996), ‘Rationality and the Emotions’, Economic Journal 106(438), pp. 136–97, and Jon Elster (1998), ‘Emotions and Economic Theory’, Journal of Economic Literature 36(1), pp. 47–74.

  8. See Jaap van Ginneken (1992), Crowds, Psychology, and Politics, 1871–1899, Cambridge University Press.

  9. Jean-Gabriel De Tarde (1890), The Laws of Imitation, trans. Elise Clews Parsons, 1903, New York: Henry Holt and Company.

  10. Gustave Le Bon (1895), The Crowd: A Study of the Popular Mind, Lexington, KY: M
aestro Reprints, p. 9.

  11. Other cultures embrace the idea that the group is something quite different from the individuals who comprise it. The marketing expert Mark Earls explores some of these insights, including the Zulu and Xhosa concept of Ubuntu – which means something like ‘shared humanity’ – in Mark Earls (2009), Herd: How to Change Mass Behaviour by Harnessing Our True Nature, Chichester: John Wiley and Sons.

  12. Le Bon (1895), pp. 11–12.

  13. Charles Mackay (1841), Extraordinary Popular Delusions and the Madness of Crowds, Lexington, KY: Maestro Reprints.

  14. For later psychoanalytic approaches, see the writings of other psychoanalysts, for example Ernest Jones (1923/2009), Essays in Applied Psycho Analysis, London: The International Psycho-Analytical Press, reprint by Charleston: BiblioBazaar.

  15. Wilfred Trotter (1916), Instincts of the Herd in Peace and War, London: T. F. Unwin.

  16. Sigmund Freud (1921), ‘The Herd Instinct’, in Group Psychology and the Analysis of the Ego, in The Standard Edition of the Complete Psychological Works of Sigmund Freud, Vol. XVIII, London: Vintage, pp. 117–21.

  17. Trotter (1916), p. 120.

  18. Aristotle, Metaphysics, Book VIII, 1045a.8–10.

  19. Kurt Koffka (1935), Principles of Gestalt Psychology, New York: Harcourt, Brace and Company, p. 176.

  20. Wilhelm Reich (1946), The Mass Psychology of Fascism, trans. Theodore P. Wolfe, New York: Orgone Institute Press.

  21. Wilhelm Reich (1972), Character Analysis, 3rd edn, trans. Vincent R. Carfagno, ed. Mary Higgins and Chester M. Raphael, New York: Farrar, Straus and Giroux.

  22. George A. Katona (1951), Psychological Analysis of Economic Behavior, New York: McGraw Hill; George A. Katona (1975), Psychological Economics, New York: Elsevier.

  23. Akerlof and Kranton (2011).