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farminator3000

(2,117 posts)
Mon Jan 14, 2013, 03:39 PM Jan 2013

"what we've got here is failure to communicate" or mass hysteria...collective delusion-or GROUPTHINK

http://www.nber.org/papers/w14764.pdf

this will make you go cross-eyed- i skipped all the formulas- interesting stuff, though...

the bold parts remind me of a certain lobbying org- 3 letter acronym- first letter N, last letter A...

page 12-
The proposition’s third result shows how both types of cognitive interdependencies are amplified,
the more closely tied an individual’s welfare is to the actions of others.20 Three interesting
implications ensue:
(a) Groupthink phenomena are likely to be particularly important for closed, cohesive groups
whose members perceive that they largely share a common fate and have few exit options.
This
is in line with Janis’ (1972) findings, but with a more precise notion of “cohesiveness”.
(b) In groups with asymmetric roles, such as hierarchies, there will be a tendency to “follow
the leader” into realism or denial.
This idea is formalized in Section 1.4 below.
(c) Contagious beliefs are also more likely for large-scale public goods, such as those provided
by a government, market, or other society-wide institutions which a single individual has little
power to affect.

***

intro-
This paper examines how collective beliefs and delusions arise and persist in organizations
such as teams, firms, bureaucracies and markets. In the aftermath of corporate and public-policy
disasters, it often emerges that participants fell prey to a collective form of overconfidence and
willful blindness: mounting warning signals were systematically ignored or met with denial,
evidence avoided, cast aside or selectively reinterpreted, dissenters discouraged and shunned.

Market bubbles and manias exhibit the same pattern of investors acting “color-blind in a sea of
red flags”, followed by a crash.1
Janis (1972), analyzing policy decisions such as the Bay of Pigs invasion, the Cuban missile
crisis and the escalation of the Vietnam war, identified in those that ended disastrously a cluster
of symptoms for which he coined the term “groupthink”.2 Although some later work was
critical of his characterization of those episodes, the concept has flourished and spurred a large
literature in social and organizational psychology.

conclusion-
A somewhat different class of collective delusions are mass panics and hysterias. While
the model generates not only hard-reality crashes but also episodes of excessive doubt and
overcautiousness, the latter seem too mild to capture what goes on in a full-fledged panic.40 Understanding
the sources and transmission mechanisms that underlie delusional group pessimism,
rather than optimism, is an interesting question for further research.
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