Mimetic contagion and speculative bubbles

Abstract

The present essay has focused on specularity as a type of intersubjectivitywithin self-referential systems. We have stressed the self-organizationaldimension of specular processes, which lead to the emergenceof collective objects around which the group structures itself. Rationalbubbles, sunspots, and conventions provided us with examples of thiskind of self-organization within self-referential groups. It seems thatwe have here a theoretical schema that can account for numeroussocial institutions. Such is the case with money, which the overlappinggenerations model shows to belong to the same problematic. We haveobserved that individual and collective representations play an essentialrole in the definition of specular dynamics. In fact, giving thecollectivity a means of interpreting and understanding the natural andsocial environment is a crucial function of these representations. Inspite of its great importance, this cognitive dimension of collectiverepresentations has hardly been explored in previous theorizing. Wehave given priority to a specific form of specularity, namely, mimetism,which is in our view at the very heart of financial processes. Far frombeing the aberration that traditional approaches deem it to be, imita-tion is one of the most important types of rationality in situations ofuncertain and in situations where the agents' outcomes are highlyinterdependent. Our central hypothesis amounts to considering thatthe emergence of speculative bubbles on various kinds of markets canbe explained in terms of mimetic dynamics. Should this hypothesis beconfirmed, it would be possible to account for a phenomenon that isoften observed, namely, the link between bubbles and a decrease inthe diversity of opinion on the market. In our approach, conventionsare taken to be the outcome of a mimetic process. Conventions are thesocial objects created by a unanimous mimetic polarization.