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Presidential Address: Social Transmission Bias in Economics and Finance
Author(s) -
HIRSHLEIFER DAVID
Publication year - 2020
Publication title -
the journal of finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 18.151
H-Index - 299
eISSN - 1540-6261
pISSN - 0022-1082
DOI - 10.1111/jofi.12906
Subject(s) - novelty , boom , scope (computer science) , economics , transmission (telecommunications) , key (lock) , positive economics , public economics , neoclassical economics , computer science , social psychology , psychology , telecommunications , engineering , computer security , environmental engineering , programming language
I discuss a new intellectual paradigm, social economics and finance —the study of the social processes that shape economic thinking and behavior. This emerging field recognizes that people observe and talk to each other. A key, underexploited building block of social economics and finance is social transmission bias : systematic directional shift in signals or ideas induced by social transactions. I use five “fables” (models) to illustrate the novelty and scope of the transmission bias approach, and offer several emergent themes. For example, social transmission bias compounds recursively, which can help explain booms, bubbles, return anomalies, and swings in economic sentiment.