CHAPTER 5Biological Frameworks: EPIDEMIOLOGY AND EMERGENCE
Even completely rational people can participate in herd behavior when they take into account the judgment of others, and even if they know that everyone else is behaving in herdlike manner. The behavior, although individually rational, produces group behavior that is, in a well-defined sense, irrational.
—Robert Shiller
This chapter provides two biological lenses through which to study booms and busts: an epidemic lens and an emergence lens. The epidemic lens, as described next, has use in helping us to determine the relative maturity of a boom and the potential imminence of a bust. The emergence lens provides a powerful explanatory framework through which to understand how groups can be misled into an uninformed consensus.
Scientists and medical professionals alike have been studying the dynamics of epidemics for hundreds of years. The basic framework utilized by these practitioners has been one focusing on infection rates. Many variables complement this focus, but if we recognize human behavior typical of a boom as “feverish,” then the analogy becomes more obvious. Although the “infection rate” (for example, how quickly people believe the world is different) is not very useful by itself, combining it with the rate at which people are either “cured” of their disease or die from it exponentially increases its value to us. The chapter briefly touches on these dynamics before turning to the idea of emergence.
Emergence ...