I have not been inclined to post here for some time. Markets are at a very interesting juncture across asset classes, and I intend to post about this shortly.
In the meantime I have been pursuing my project of exploring classic works – particularly those from the C19 – for neglected insights into the nature of mass psychology and social change.
Below follows a quote a friend sent me from Gabriel Tarde’s Laws of Imitation (from pages 229-230). The book is a little wordy, being translated rather literally from the French, but is well worth a read. It is funny how everyone refers to Charles Mackay’s work on Manias, but it is quite rare for people in the investment world to read much from previous eras beyond that.
It is quite clear to me that many older authors have insights that are not maintained or well-articulated in more recent textbooks. It is simply not true that intellectual history fits the Whiggish theory of forward progression. Sometimes learning takes a wrong turning, or sometimes older theories are abandoned due to a loss of prestige and a change in fashion rather than as a result of a conclusive refutation. This mattered much less before our current era of radical specialization and replacement of study of the original texts of a fields by condensed textbooks. Associated with this is a sense that thoughts not expressed in formalistic (mathematical) language are not rigorous and therefore unscientific.
In democratic countries, as Tocqueville remarks, majorities as well as capitals have prestige. ‘As citizens become more equal and more alike the tendency of each to blindly believe in a given man or class diminishes. The disposition to believe the masses increases and public opinion guides society more and more.’ Since the majority becomes the real political power, the universally recognised superior, its prestige is submitted to for the same reason that that of a monarch or nobility was formerly bowed down to. But there is still another reason. ‘In times of equality men have no faith in one another because of their mutual likeness; but this very resemblance inspires them with an almost unlimited in the judgement of the public; for it seems improbable to them that when all have the same amount of light, the truth should not be found on the side of the greatest number.’ This appears logical and mathematical; if men are like units, then it is the greatest sum of these units which must be in the right. But in reality this is an illusion based on a constant oversight of the role played here by imitation. When an idea arises in triumph from the ballot-box we should be infinitely less inclined to bow down before it if we realised that nine hundred and ninety-nine thousandths of the votes that it polled were but echoes. Even the most careful historians are constantly misled by this and are inclined to enthuse with the crowd over the unanimity of certain popular wishes which the people’s leaders have inspired, as if it were something marvellous. Unanimities should be greatly distrusted. Nothing is a better indication of the intensity of the imitative impulsive.
Here is a link to the Tarde PDF.