Tuesday, September 01, 2009

pluralistic ignorance

Psychologists have an explanation for why crowds are prone to do stupid things at crucial moments. It can be action or inaction. But studies show people look to the actions of others to determine what the correct course of action is in an uncertain situation. It's called social proof. You don't want to look like an idiot, so you wait to see what everyone else is doing and go along.

If everyone's running up the street bashing windows, you'll experience pressure to join in. On the other hand, if, say, everyone is buying stocks because no one appears to be concerned that they are expensive, you'll experience subtle pressure to do the same.

In evolutionary terms, doing what other people are doing is generally a good strategy. It saves you the time and energy of thinking about the decision yourself. And you have to assume that they probably wouldn't be doing it if it didn't promote their survival in some way.

The shrinks call this phenomenon "pluralistic ignorance." We were reading about it last night over cocktails at Barney Allen's, right next door to our new head quarters in the heart of St. Kilda. It made a lot of sense, at least if you're trying to explain why so many people do so little when they have so much to lose.

[via investwise]

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