We see such dismay among stock market investors today. People are trying to guess whether other investors are thinking that yet others are thinking that the stock market is “dangerous,” or whether it is instead a great time to invest. And investors are making that decision with little more information than the “Girl of To-Day” judges had.

When you hear a conversation among professional investors — including those who manage money for big institutions like university endowments and pension funds — it often sounds as if they are engaged in just this kind of guesswork. You wonder how many people are actually basing their decisions on what is taught in business school: calculating an optimal portfolio based on a rational statistical analysis of fundamental economic data. If you believe in efficient markets, you have to conclude that some other investors are doing those calculations today, because they don’t seem the main activity of the people I’m hearing.

In fact, the best explanation for the market’s back-and-forth swings is that each day we are conducting a Keynesian beauty contest, and reassessing what others think that still others are thinking. On days without much news, the market is simply reacting to itself. And because anxiety is running high, investors make quick, sometimes impulsive, responses to relatively minor events.

Alan Greenspan, the former Fed chairman, typified the concerns about other investors on “Meet the Press” on Aug. 7, the Sunday before the market’s big drop of almost 7 percent. “What I think the S.& P. thing did was to hit a nerve that there’s something basically bad going on, and it’s hit the self-esteem of the United States, the psyche,” he said. “And it’s having a much profounder effect than I conceived could happen.” He was talking about what other investors were thinking, not about the substance of the S.& P. downgrade.

Over that weekend, there was widespread speculation that the downgrade would push interest rates way up. But on Aug. 8, even before the Fed issued its statement, 10-year Treasury yields began to drop, not rise, and many people started to reassess what other people were thinking — and what other people were thinking about other people, and so on.

This process creates uncertainty not only for the stock market, but also for the overall economy. The only thing to fear is fear itself, Franklin D. Roosevelt said of the Great Depression, and he was right. We are constantly trying to reassess the fear of others, and others’ fear that others are also afraid.

This may sound like a crazy game, but if others are playing it, we must, too. The outlook for the economy depends on how this convoluted beauty contest plays out.