Social Mood Conference  |  Socionomics Foundation
By Alan Hall | Excerpted from the August 2012 Socionomist

Originally published in the under the title, “Social Mood Impels Feelings of Certainty and Uncertainty”


 

[Ed: In this fascinating article, Alan Hall explains that while the future is equally uncertain at all times, people perceive the future to be less certain during times of increasing negative social mood. Here is an excerpt of the article.]

…Quantifying Uncertainty

Over the years, researchers have developed hard evidence that allows us to link changes in the volume of expressions of uncertainty with bull and bear markets. Let’s begin by looking at several uncertainty indexes.

1. Measuring Economic Policy Uncertainty

Economists Scott R. Baker, Nicholas Bloom and Steven J. Davis developed their Index of Economic Policy Uncertainty in their February 2012 paper, “Measuring Economic Policy Uncertainty.” The authors used three measures to construct their index: (1) newspaper coverage of economic policy, (2) the number of federal tax code provisions set to expire, and (3) what they refer to as “disagreement among economic forecasters.”

Figure 1

Figure 1 plots the monthly Inflation-Adjusted Dow against the authors’ index. … This index has reflected fear and uncertainty in the past, as its largest declines prior to 2000-2012 occurred in the bear markets of 1929-1932 and 1966-1980 (not shown).

Note that social mood creates a major division on this chart at the Dow/PPI peak in January 2000. Now observe that just a few months prior, the uncertainty index reached its second-lowest level in nearly three decades. Note also that most of the significant peaks in the uncertainty data correspond to significant lows in the Dow/PPI. And finally, note that the overall negative social mood trend since 1999 has accompanied increasing expressions of uncertainty. …

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In this five-page article, Author Alan Hall presents compelling data from multiple studies to show the true cause of feelings like uncertainty and fear. That is, negative social mood.

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Socionomics InstituteThe Socionomist is a monthly online magazine designed to help readers see and capitalize on the waves of social mood that contantly occur throughout the world. It is published by the Socionomics Institute, Robert R. Prechter, president; Matt Lampert, editor-in-chief; Alyssa Hayden, editor; Alan Hall and Chuck Thompson, staff writers; Dave Allman and Pete Kendall, editorial direction; Chuck Thompson, production; Ben Hall, proofreader.

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Most economists, historians and sociologists presume that events determine society’s mood. But socionomics hypothesizes the opposite: that social mood regulates the character of social events. The events of history—such as investment booms and busts, political events, macroeconomic trends and even peace and war—are the products of a naturally occurring pattern of social-mood fluctuation. Such events, therefore, are not randomly distributed, as is commonly believed, but are in fact probabilistically predictable. Socionomics also posits that the stock market is the best available meter of a society’s aggregate mood, that news is irrelevant to social mood, and that financial and economic decision-making are fundamentally different in that financial decisions are motivated by the herding impulse while economic choices are guided by supply and demand. For more information about socionomic theory, see (1) the text, The Wave Principle of Human Social Behavior © 1999, by Robert Prechter; (2) the introductory documentary History's Hidden Engine; (3) the video Toward a New Science of Social Prediction, Prechter’s 2004 speech before the London School of Economics in which he presents evidence to support his socionomic hypothesis; and (4) the Socionomics Institute’s website, www.socionomics.net. At no time will the Socionomics Institute make specific recommendations about a course of action for any specific person, and at no time may a reader, caller or viewer be justified in inferring that any such advice is intended.

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