Sheeplike, like lemmings, the pejorative descriptions of herd behavior are
common. But, so are herds. And they have been at least since the dinosaurs.
So, what do we humans find ridiculous when in nature things seems to be
fine? Do we see ourselves as lone predators? The mountain lions or tigers
of the world? Why? And is there even a hint of truth in that self image?
The sheep milling about and bleating, eventually all heading in one direction at the urging of a shepherd and dog is not flattering to human amour propre. And to think that we would blindly rush off a cliff like a bunch of rodents is downright insulting. But, at the same time we have to acknowledge that there are trends in all sorts of human activities, even fads. And occasionally we even rush off cliffs. Wars are an example, but so are stock market bubbles. It would seem that the profit maximizing economic man with firm command of the marginal utility function could never be so foolish.
Ahhh. Economic man, that paragon, informed, rational, but above all, mathematically convenient. In firm command of his destiny he surveys impartially and without emotion the alternatives in his life, always choosing to maximize his utility. The model is explanatory in any number of areas, many outside economics. In fact, probably the salient achievements of economic theory has been outside economics. The common wisdom is that macroeconomics is dead. It's hard to argue that economies behave like physical systems, say fluids, when everyone knows that a water molecule doesn't CARE which way it goes. And, it is also commonly known that in carefully controlled laboratory conditions rats do what they damn well please. Arguably, rats are better economic creatures than people because they consistently play the odds once they have figured them out. People always are looking for the system behind a set of random numbers.
But, there remains a feeling that somehow herd behavior is less than rational. What about pricing, though? If you offer an item for sale in a competitive market pricing has to be herdlike to be rational. If you price too high, then you just help sell the lower priced competition. Of course, if you price too low, the results are even more obvious. So, hug the price point, and everyone does baaaa.... baaaa... best. Now, like musical chairs, in a changing environment someone gets left out. Unlike musical chairs, that might be the majority. But, on balance, herd behavior is good for the herd.
In a natural environment herds are usually grazers and the herd offers the best way to cover a particular range while retaining a potential defence. Yes, the lone buffalo might eat more fresh grass if he went into the next valley, but if the wolves find him, he's lunch. Surely that has nothing to do with humans? How about sayings like, "Nobody ever got fired for investing in..."? Or, everybody knows about hurricanes and barrier islands on the Atlantic Coast. They are ephemeral. But, you still have people who invest tons of money in ocean front property to enjoy the beach and the view. They bet, like the herd, that it won't happen to them. Once I knew a small herd of cattle that missed roundup and settled down to winter at a hot spring. The coyotes called them smorgasbord. But next spring, the grass was growing and the rest of the herd came back and munched among the bones. So, after the hurricane, there comes reconstruction with the rationale that, "Hey, it was the hundred year storm..."
As for economic man as the wolf snatching the opportunities that come to his jaws, it may be flattering to our self image. But the probable reason we like aged meat is that rather than being mighty hunters, our ancestors were probably competing with jackals and vultures for the protein part of our diet. This might have something to do with our reverence for real predators. And, in a hunter-gatherer society the bulk of the calories were provided by the gatherers. Read: herbivores, or if you will, baaa.... baaaa...
So, if you have any other examples you would like to share, please drop me an email. cbw@apo.com