Information Cascades in the 1500’s
With the spread of social media, information travels at an unprecedented rate these days allowing us to see what and when our friends are doing constantly. As a result of this, we are constantly influenced by what our friends are doing and are able to make decisions based on their actions. This in turn leads to a phenomenon we learned about in class called an information cascade. An information cascade refers to a situation in which individuals make decisions based on the choices of others without necessarily taking into account all information necessary to make this decision. An interesting example to explain information cascades introduced a person who wanted to purchase a new cellphone. This person would make the decision about what phone to buy simply by looking around and observing what other people had in there hands without necessarily knowing whether it was a good product or not. The cellphone buyer in this case was placing trust in the idea that if everyone had a certain type of phone it must be a good purchase.
The article linked below touches upon an interesting spin of the information cascade. This phenomenon proves to have deep social implications as we saw people rise up against the dictatorships in Egypt and Tunisia because of information spread through social media. Social unrest was built up through these social networks and allowed for everyone to be informed as to how the populace felt about the current ruling party. The article also brings to light information cascades during a time when Facebook was hundreds of years away. During the Protestant Reformation in the 1500’s Martin Luther was utilizing the printing press to print pamphlets and spread word of his new ideas to oppose the Catholic Church. People quickly began to support the cause, as they frequently saw the pamphlets in other people’s hands which convinced them of the validity of this movement.
Information cascades are a very powerful social phenomenon with deep implications, which means their continued study is imperative.
http://www.economist.com/node/21541719