Information Cascades in relation to Mass Movements
Those who possess limited knowledge regarding the topic might think that information cascades simply refer to what happens when people make decisions based on the decisions of others around them. While overtly information cascades seem like a trivial and easy to understand phenomena, in reality, most people don’t realize how prevalent information cascades are in every day society in the sense that information cascades unconsciously drive the decisions of many aspects of people’s decision-making. Information cascades especially have the potential to occur when people make decisions sequentially, with alter people watching the actions of earlier people, and from these actions inferring something about what the earlier people know. In an article by “M.S.”, the writer ties the concept of information cascades to stock market fluctuations, and to protests in various cities. Such diverse examples are evidence that information cascades can be observed in a wide variety of situations
As explained by the writer, the fluctuations of the stock market often show characteristics of information cascades at work. When the stock price goes up, this is because more people are buying, which drives the price up. Similarly, when the stock price is falling, more people sell, which drives the price further down. Though the first people who decide to buy stocks might have private, reliable information that justifies their reason for buying the stock at that particular time, as more people buy the stock and drive the price up, people begin to buy the stock simply because everyone else is doing so, and they assume that the other people possess reliable information. This is when the information cascade becomes evident. The same explanation can be used for when a lot of people sell their stock, driving the price down. Similarly, information cascades occur in protests, and can even start revolutions. While the people who first start the protest might be dedicated to their cause, and might have performed sufficient research, as time passes, people often join the protests even if they have imperfect information about the cause, simply because a lot of other people are. This is evident in the writer of the article’s example of a protest that initially started out in NYC, but eventually led to similar protests in Boston, London, Amsterdam, as well as about a hundred other cities all over the world.
This article was interesting because it shed a new light on the scope of how widespread information cascades are in every day society. Personally, I’ve never thought of information cascades as being a part of the underlying cause of so many examples of every day decision-making. This just goes to show how principles such as information cascades subtly dictate how we make choices in our every day lives.
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Source:
http://www.economist.com/blogs/democracyinamerica/2011/10/mass-movements