This essay by Robert R. Prechter, Jr. originally appeared in The Elliott Wave Theorist in November 2002. Its citation is:

Prechter, Robert R. (2003). Pioneering Studies in Socionomics. Gainesville, Georgia: New Classics Library, pp. 215-218

The book is also available for purchase as part of a two-volume set.

There is probably not one person in a million who would disagree with the conventional view, espoused everywhere, that the attacks of September 11, 2001 and the subsequent deliverance of anthrax-laced letters to individuals shattered the confidence of Americans. Yet that conclusion flies in the face of the facts.

Figure 1 shows every one of those events in the context of stock market behavior, consumer confidence and market psychology. As you can see, social mood and confidence bottomed six trading days after the 9/11 attack and continued to improve for months, throughout the reports of anthrax-laden mail deliveries, throughout the spectacles of men covered from head to toe in protective suits testing offices and other facilities for deadly anthrax spores, throughout reports of six deaths by anthrax, throughout the reports that al-Qaeda was running rampant and planning to poison water supplies, blow up bridges, release smallpox into the population and detonate a nuclear bomb in major U.S. cities. The conventional belief, which is an utter assumption, is that these reports would and did cause and instill increased fear and pessimism in society. This belief is the way people think, probably because they assign the type of causality that exists in the world of physics, the realm that humans have greatly learned to manipulate and control, to that of sociology. The facts contradict this notion.

Figure 1 - Click Chart to Enlarge

Pundits who make the claim of news causality never check the data. Now we can see that social mood actually improved throughout the time of the anthrax news reports. Proponents of the conventional view of social causality (i.e., virtually everyone) are now obliged to ignore this fact in order to maintain that incorrect view.

Does that mean that social events and mood are random? Is there no causality at all? No, the socionomic hypothesis explains the proper causality. Social mood had deteriorated for eighteen months prior to the outbreak of these attacks. The negative mood permeating society by September 2001 had served to cause government agencies to become sloppy, missing cues to al-Qaeda's plans. It gave al-Qaeda's members the emotional trigger to decide that then was the time to strike. It caused someone either aggressive or unbalanced to choose that time to kill people through the mail and others later to perpetrate anthrax hoaxes.

Now observe the aftermath: A few months after the trend changed toward the positive, as evidenced by all the graphs in Figure 1, what happened? There were no more attacks from al-Qaeda, and the anthrax mailings ceased. The improving mood supported coordinated efforts to deal with these events and suppressed the forces that triggered them.

Whether or not you accept the idea that the changes in social mood effected these changes in social actions, the fact is that the chronology supports this case while simultaneously decimating the conventional view of causality. At minimum, an honest thinker has no choice but to abandon the conventional view. Whether he accepts the socionomic insight is another question, but he may no longer without contradiction espouse the old way of thinking. In fact, any objective person who bothers to check the chronology of various such assertions will be forced to abandon the conventional view.

The Feedback Loop Works Only Within Waves, Not With Actions
I used to think that mood formed a feedback loop with events, which in turn reinforced the mood. I have since seen that this idea is erroneous. Our studies on the Enron scandal and the terrorist attacks demonstrate this point empirically: Events do not affect aggregate mood. Theoretically speaking, moreover, it is abundantly clear that events cannot affect social mood. If events formed a feedback loop with mood, then social trends would never end. Each new extreme in mood in a particular direction would cause more reinforcing actions, and those actions would reinforce that same mood, and so on forever. This is an untenable idea.

The only feedback loop that occurs is one involving the propagation of Elliott waves through human minds. In order to participate in social Elliott waves, minds must interact with others and become synchronized with them. All types of communication media, from face-to-face discussion to satellite television news, serve to effect this interaction.

This interaction produces Elliott waves, and Elliott waves determine the trends of social mood, and those trends stimulate actions, which are reported as events. The actions and events are final end results with no consequences of their own in terms of the waves. Events do affect minds to the extent that they often shape specific actions that owners of those minds take, but they do not alter or affect the shared mood trend.

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