Wednesday, September 24th, 2003
Fred Reynolds writes "You'd think that predicting human behavior would be
easy. A moment or two's reflection, and it's obvious that people act to
further their own interests. And in fact, the science of economics is founded
on this observation. So everyone should be a rational economizer, busy calculating
their individual costs and benefits, and acting accordingly. Right?" Since
things aren't quite so simple, Reynolds has reviewed Robert R. Prechter's
Socionomics: the Science of History and Social Prediction; read on
for the rest.
Yet...it's also easy to see that people do a lot of nutty things, and usually
do so in groups. They wear leg warmers, wide neckties, then narrow neckties.
Long skirts, short skirts. No skirts. Paisley. They ride roller skates,
then scooters. They buy Pet Rocks, collectible Beanie Babies, and stocks
of dot-com companies with no profits and no business plan. They ingest odd
substances, and subscribe to odd belief systems. They also fight wars, and
blow up themselves and others.
This jackass behavior has lead to some telling but apparently casual observations,
such as this gem by Charles MacKay: "Men, it has been well said, think in
herds; it will be seen that they go mad in herds, while they only recover
their senses slowly, and one by one." Offhand observation aside, it remains
true that the non-rational behavior of human beings in society has usually
made monkeys out of those who seriously attempt to forecast it.
This is why Robert Prechter's 2-volume opus Socionomics: The Science
of History and Social Prediction is such a joy to read. It's a credible
and provocative attempt to found a predictive science of human social behavior.
It's also a truly different work. The number of new propositions and arguments
advanced in Socionomics is matched by their highly controversial nature,
and by the amount of evidence put forth by Prechter and his co-authors.
Readers looking for non-fiction that is wide in scope, provocative, and
meaty will enjoy these two books.
What's It All About?
It's helpful to think of Prechter's massive argument as if it was structured
like an hour-glass. The first volume of the set, The Wave Principle of
Human Social Behavior and the New Science of Socionomics (hereafter:
HSB) is the fat upper part of the glass. It provides the theoretical justification
for a shorter set of linked propositions or principles that constitute the
narrow neck. The second volume,Pioneering Studies in Socionomics (hereafter:
PSS) consists of a series of essays and articles that apply those principles
to a wide swath of human endeavor: music, sports, politics, war and peace,
scientific and intellectual trends, religion, economics and finance. This
is the fat bottom of the glass, the payoff of analysis and prediction.
The Propositions
Socionomics has been defined as the field of study encompassing the origins
and effects of an endogenous human social dynamic called the Wave Principle,
a specific sequence of progress and regress that regulates the complex system
of collective mood and social interaction. It examines and forecasts market
and social trends on the following basis: that the character of social,
political, cultural, financial and economic trends are the product of collective
human psychology, which is based upon an unconscious herding impulse deriving
from pre-rational portions of the brain.
This definition shows why Socionomics... is a two-volume set: it's not easily
summarized.
Any science must have a way to measure its subject. Prechter claims that
human social behavior can be measured with several meters, but the most
accurate meter is the movement and fluctuation of economic values, as expressed
in stock markets every trading day. He believes that markets provide a real-time
reflection of the collective social mood. Measuring social mood is important
because:
-
The events of history and culture are driven by the engine of collective
social mood. Social mood temporally and logically precedes social events,
and is the cause of social events. War and terrorism don't cause distressed
people; distressed people create the conditions and events that lead
to and comprise war and terror. A booming economy does not create ebullient
people; ebullient people produce more, consume more and participate
in and contribute to market manias.
-
Social mood is itself the product of the interaction of the society's
members. Collective mentation -- herding -- arises from the interaction
of the players in a process similar to the emergent behavior of other
complex, non-linear systems. Prechter quotes philosopher Eric Hoffer:
When people are free to do as they please, they usually imitate each
other.
-
Social mood fluctuates between polarities of primitive emotional states,
such as confidence/fear, skepticism/credulity, optimism/pessimism, benevolence/malevolence,
etc. These fluctuations are not effected by outside events, but move
according to their own internal logic. They appear to arise in a dynamic
that is endogenous to the social system.
-
Social mood fluctuations are patterned by the [Elliott] Wave Principle,
a specific sequence of progress and regress that regulates the complex
system of collective mood and social interaction. Prechter cites the
work of market analyst R.N. Elliott, who, in the 1930's, discovered
the patterns in the markets that bear his name. These patterns -- Elliott
waves -- are measurable and may be charted.
-
Elliott waves, which are typically used to chart and forecast the movement
of stock market valuations, are self-similar at different degrees of
scale; i.e. a monthly chart of the Dow looks a lot like a weekly chart,
or a 5-minute chart...or a 5-decade chart. Elliott apparently discovered
that the market movements are fractal, decades before Mandelbrot invented
the term and took credit for that observation.
-
The specific patterns described by Elliott Waves are in close relation
to the Fibonacci sequence of numbers. The Fibonacci sequence, and the
Fibonacci ratio derived from it, appear ubiquitously in natural forms
ranging from the geometry of the DNA molecule to the physiology of plants
and animals.
-
7. The behavior of these fractal, Fibonacci-based waves is specific
and patterned. Hence, it is (probabilistically) possible to predict
human social behavior.
Given the emphasis placed upon it, it's probably not too gross a distortion
to define socionomics as the science of social mood: its genesis, behavior,
and effects.
Justification
Any one of the propositions above is controversial; taken together they
an extraordinarily claim. In the first volume of the set, Prechter attempts
to provide extraordinary evidence to support his claims, and he makes a
strong case.
HSB surveys the evidence of fractals and Fibonacci in nature and finance.
Prechter sites study after study that finds the Fibonacci sequence in phyllotaxis,
in branching or arboral systems, in nautilus shells, pine cones, the DNA
molecule, neurons and galaxies ... and in the Dow, Nasdaq, and other market
indices. The implication is clear: human social activities are a natural
process, no less than the growth of trees or the formation of solar systems.
For some readers, this tour-de-force alone may be worth the price of the
book.
Prechter then leans heavily on Paul MacLean's book, The Triune Brain in
Evolution to explain his endogenous herding impulse. MacLean and others
have found evidence that the pre-reasoning limbic system may be hard-wired
to herd or flock. The reasoning neocortex may override the impulsive, emotional
limbic system if given sufficient time -- and in this possibility lies our
experience of free will. But the emotional limbic system is faster and more
powerful than the reasoning neocortex, and often wins out. As Prechter puts
it: If you doubt its power and speed, try to envision how you would react
if someone suddenly dumped a dozen writhing three-foot blacksnakes in your
lap. Understanding that they are harmless, try to decide how long it would
take you nevertheless to train yourself not to budge upon being surprised
that way in the future.
Building on this theoretical base, HSB goes on to develop detailed statements
about socionomics proper, statements that Prechter identifies as observations,
not yet a hypothesis. He categorizes various social polarities that seem
to characterize all social interaction. He traces -- measures -- the ebb
and flow between these polarities with various social meters, including
popular culture (movies, fashion, music, sports) and, of course, the stock
market. For one example, there is a chart of baseball stadium attendance
figures in the U.S. that sports a clearly developed Elliott Wave pattern.
Based on the pattern, Prechter predicted that baseball's popularity would
wain, as it subsequently has.
Application
Pioneering Studies in Socionomics continues this analysis of contemporary
trends and events as seen through a socionomic lens. Here's a short list
of grist for the socionomic mill: restaurants, Broadway, religion, central-banks
(e.g. the Federal Reserve System), Pro Wrestling and the Bull Market, Microsoft,
the attacks of 9/11, macroeconomics, and song lyrics. All of these human
endeavors are found to fluctuate over time, in the now familiar fractal,
Fibonacci-based Elliott waves.
Many Slashdot readers will be amused/intrigued/outraged by the chapter on
quantum physics, and its parallel to the social sciences. Here Prechter
sites the work (published and unpublished) of physicist Lewis E. Little.
Little's thesis challenges the conventional view of quantum mechanics and
presents a new theory that places activity at the sub-atomic level on the
same grounds of cause and effect as all other physics. There's enough controversy
in this chapter alone to merit a separate book!
What's Missing?
As sprawling as these books are, there is no discussion of methodology,
seemingly a critical lacuna in the founding of a new science. In the hard
sciences there is today little discussion of methodology; the discussion
has concluded. In the soft or social sciences, entirely libraries could
be filled with the debates on proper methodology. Which subjects should
be chosen for research, and how should they be chosen? How should experiments
be conducted? Or is experimentation possible? Or even desirable? Is the
use of mathematics appropriate? If so, how?
Answers to these questions, which Prechter may provide in due time, are
needed to defend what's proposed. For example, an easy criticism to make
of the various essays in PSS is that the subject matter is cherry-picked,
and that choosing different subjects may have yielded different results.
The particular criticism may or may not be valid; it will take a methodological
argument to answer.
A Closing Analogy
James Gleick's Chaos tells the story of the scientists and researchers
who founded a new science. Over and over, they tell a similar story: that
chaotic behavior was ever-present in the physical world, but dismissed as
noise in the experiment. It required a profound shift in perspective to
realize that the noise was worth studying.
Is Prechter, with his Fibonacci-based fractal waves of human social behavior
and socionomic insight, correctly pointing out a similar need for a profound
shift in perspective? Is the noise of pre-rational human social behavior
worth studying? Does our future lie in our reasoning mind, or our prehistoric
brain?