Nonlinear thermodynamics and social science modeling: fad cycles, cultural development and identificational slips

American Journal of Economics and Sociology, The, Oct, 1995 by Elias L. Khalil

Likewise, cycles of fashions or business fluctuation lack any reference to the constitutional underpinning and organization of labor which are the subject of social evolutionary theory. To wit, stock market gyration could be entirely endogenous, a result of players trying to guess what is the majority consensus which creates instability known as the "common knowledge" problem. So, the change of political regimes or switch of technologies involve discontinuities which only superficially resemble the business cycle. But the two discontinuities do not belong to the same class as Roth thinks. It is easy to lump fads, on one hand, with long-lasting, successful social reform movements, on the other. The secular trend of change never advances along a rectilinear path. The trend is rather deduced, in retrospect, from the vicissitudes of actual fads. The difficulty arises from the fact that empirical data cannot ex ante disengage the two kinds of change.(4)

The difficulty surfaces, in examples, when a visionary prophet appears with a reformist program to change the tastes and practices of the members of a community. He could win over some friends and relatives, and they could dream of changing the basic social and political institutions. However, nonlinear dynamics cannot explain why such a movement would win in some cases and become a trend, yet lose in most other cases and only enjoy popularity limited in time and number.

When a socio-political reform movement loses, it means in retrospect that the basic constitution of the community, sparing exogenous reasons like repression, has exercised greater dominance over the members. Thus, the rise of a movement beyond what the community is ready for is going to end up being temporary, or very limited in impact. But this could only be concluded in post boc analysis.

The difficulty of disengaging fluctuation from long-term trends appear in deciphering the course of speculative bubbles. One cannot be certain ex ante that a particular speculation in the stock market or in real estate prices will collapse. A particular speculation, or a money supply binge, could last for a long time and even not lead into a burst or a collapse of the value of the currency (Kindleberger, 1978). It could, like a successful reform movement, express a long-term foresight of the growth potentiality of an economy or a region (Brock, 1974; Tirole, 1985). But once a bubble bursts or a higher rate of money supply lead to inflation, observers can ex post conclude that the rise of the prices of stocks, prices of real estate, and holdings of money of that particular market have exceeded the fundamental values. Only in retrospect, after the failure of a social movement or of a market rally, could one be certain that the hopes and expectations of the participants and speculators were beyond what the potential of the secular trend could bear.

The tools of nonlinear dynamics might be useful in explaining how a social movement, a cult, or an investment binge gets off the ground and achieves, through the ripple effect, some success. But the tools cannot shed light on why the self-feeding success eventually fails in some situations and succeeds in others. As Roth admits, certain scandalous accidents, like suicide and rape, seem to strike the nail in the coffin of a fervent revivalist movement. But in many other situations, the same accidents could be shrugged off. As a result, the movement could succeed in flourishing and changing the basic developmental process. Thus, nonlinear dynamics cannot help us in understanding the more fundamental forces which could stall, or instead expedite, a social movement.