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“Bubbles” are usually considered unwelcome and destabilizing phenomena associated with finance and real estate markets. Generally a bubble has developed when assets trade at prices far exceeding the estimated fundamental value. The guiding research principle of The Center for Information and Bubble Studies (CIBS) is that bubbles essentially amount to information control problems among deliberating agents who are collectively susceptible to robustly demonstrated socio-psychological features like boom-thinking, group-thinking and lemming effects, which together with determinate market models and conditions may make for bubble-hospitable environments.
CIBS will redefine and expand the study of bubble phenomena across different ontologies by:
- focusing on the socio-psychological phenomena among agents leading to often irrational group behavior facilitated by imperfect or wrongful information processing among group members influenced by social proof,
- being inspired by four main strands of bubble models in economics accordingly study concepts like “social capital”, “opinion”, “fame”, “recognition”, “scientific progress” apparent in other “markets” (agent interactive settings) with particular emphasis on the information-driven dynamics and thus study bubble formation, bursts and deflation across traditional domains and disciplines,
- uncovering, in a novel way, the formal structure and dynamics, provide simulation and experimental results, offer resolutions of, and recommendations for avoiding, the bubble or lemming behavior of agents reasoning and processing information in concert.
By aligning problems of bubble formation in misc. markets with information control problems CIBS brings together philosophy, economics, logic, social psychology, information theory, behavioural science, and computer science to form a novel and thoroughly interdisciplinary platform for analyzing and resolving often destabilizing bubble-phenomena of human and market interaction.
CIBS is a high risk / high gain endavour in which a unifying but simple framework is being proposed for explaining and resolving apparently disparate “bubble” phenomena across sectors, domains and even institutions characterizing much human behavior, thereby answering key questions like:
- are the socio-informational dynamics underlying the practices of obtaining and internalizing information via social proof?
- structural similarities and differences between these phenomena are identifiable in the formal models?
- are the generic features of the different bubble-hospitable ontologies from financial markets all the way to opinion market places and other agent interactive settings, virtual as well as real?
- Given empirically suitable models, what hypotheses regarding the resolution of erroneous socio-informational phenomena, and the fostering of correct ones, do these models provide?
- What empirical data is required to falsify/verify these hypotheses? How may the models be fitted to experiment and how may simulation runs be used to predict the emergence of bubbles?
- To what extent, and in which way, are phenomena like pluralistic ignorance, cascades, polarization, bystander effects and other group-psychological biases and erroneous reasoning responsible for macroscopic coordination phenomena like boom-thinking in religious or ideological opinion, the emergence of trends, changes in climate of opinion in science, the strange bubble economics of "selfies" and group-recognition, group-think in opinion bubbles on the web, twitter-storms and "like"-culture, cyber-bullying, popular political programs, science funding, etc.?
- What impact do opinion bubbles, polarization and lemming effects have on networks and how may such bubbles be resolved in terms of experiment, simulation, mechanism design, policy recommendations and nudges?
- Are some agent types less susceptible to unfortunate bubble based behavior than others, and if so, what are the informational conditions for “bubble immunity”?
Answering such questions will extend the prevalent theories of bubbles and evaluate their explanatory power in other disparate settings. But bubbles may not necessarily be malignant if they mirror public conviction on correct information and social influence rails reason. Bubbles calling for crowd climate awareness, race and gender equality, health care etc. seem benign and thus bubbles may perhaps be used to promote good ideas and socially desirable initiatives.
The Center for Information og Bubble Studies is situated at the Faculty of Humanities at the University of Copenhagen, and the first grant from the Carlsberg Foundation runs for a 5 year period.
Professor Vincent F. Hendricks,
Department of Media, Cognition and Communication
University of Copenhagen
Mobil: 40 16 80 63
Professor Flemming Besenbacher,
Formand for Carlsbergfondet
Mobil: 23 38 22 04