Explaining the Rapidity of Social Change

DateMay 12, 2014

Time5:00am to 6:30am

Location
4357 Bunche Hall

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Social change, for example, public support of same-sex marriage, often has the following dynamic: existing behavior or norms persist for a long time, and then change to the new normal very rapidly. This rapidity is not easily explained by processes of social learning and influence, which occur more gradually. Another example is the 2007 financial crisis, in which financial institutions gradually became aware of the shakiness of mortgage-backed securities but continued to accept them as collateral in trades for years, only to suddenly stop accepting them altogether. I present a simple game-theoretic model of this dynamic. In the model, people care about the actions of other people but also about fundamentals. When fundamentals change, people gradually learn about the change but still persist in the old behavior even after almost everyone has learned about it. Only after people realize that other people know (the change becomes not just widely known but common knowledge) does behavior change. Behavior changes rapidly for two reasons. First, the more people care about the actions of others, the more people are locked in with each other and the longer the old behavior persists, even as it grows more fragile. Second, learning about a change in fundamentals happens gradually, but simple models illustrate that learning about the knowledge of others occurs rapidly. In other words, metaknowledge substantially lags knowledge but when it increases, it increases very rapidly.

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