PGreenfinch
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 Posted: Sat Aug 16, 2003 9:23 pm Post subject: Critical threshold from individual to collective |
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Some physical science-inspired concepts can find their
analogy in social psychology. Percolation is one of them
Percolation is a slow diffusion phenomenom, which
snowballs (chain-reaction), once a "critical" threshold / mass
is reached.
This is where the"phase transition" occurs between two
situations.
Percolation happens also in social fields, among them
economic and financial markets, when individual
phenomena turn into collective ones.
It is the tipping point between underreaction and
overraction. It happens when the mass of people who
change idea and join the bandwagon get sizeable enough
If that mass doesn>t reach this triggering point,
the new trend aborts. Once it reaches it, not only the
trend settles in, but it often snowball into extreme
trend-following / herding.
This evolution can be reversible (going back to the
previous phase) or transient (towards another phase),
or irreversible. An evolutionary phenomenom
theoretically linked to that process is called
"self-organized criticality"
Other social psychology-related definitions can be found at:
http://perso.wanadoo.fr/pgreenfinch/behavioral-finance.htm |
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