Narratives and Chinese Whispers: Ideas and Knowledge in Bubbles, Diffusion of Technology and Policy Transmission

Abstract

In this paper we shall make use of a new theory of economic systems as networks formed by individuals acting on the basis of their psychology and social position (Markey-Towler, 2016) to obtain a new vision of the diffusion of behavioural change and the role of narratives (Shiller, 2017) therein. This vision is obtained by making use of the “Chinese Whispers” theorem which identifies necessary and sufficient conditions for diffusion in economic systems so conceived, and the “Made to Stick” theorem which elaborates the likelihood of ideas and narratives being incorporated into individual worldviews (Markey-Towler, 2016) whence they may influence behaviour. The diffusion of behavioural change supported by the spread of ideas is related to the emergence of bubbles, herd behaviour the uptake of technology and the effect of policy changes. The vision of these phenomena presented here is unique in that it places human psychology and the role of ideas therein at the core of a systematic model of group dynamics. A major, practical improvement for policymakers and entrepreneurs alike arrived at thus is the understanding offered of the limits of the diffusion of behavioural change as well as the extent and the manner in which this is determined by non-substitutability as much as by the network structure of the socioeconomic system. This builds on the work of Michelle Baddeley (2010); Baddeley (2013); Baddeley (2015) and constitutes an improvement on purely mechanistic models of network contagion (Newman, 2003; Gai et al., 2010; Gai et al., 2011; Giansante et al., 2012; Markose et al., 2012; Markose, 2013; Ghedini et al., 2014; Jackson et al., 2014; Acemoglu et al., 2015) as well as models of population dynamics based on predator-prey or epidemiological models (Kermack et al., 1927; Page et al., 2002; Munz et al., 2009; Foster, 2005; Haas, 2015; Klarl, 2014) which tend to obscure the role of human psychology in the diffusion of behavioural change.