What worries me the most about the turmoil in world markets is how tightly coupled thought contagions are with economic contagions. The things people believe really do have consequences. When large groups of people lock into the idea that home prices will always go up, housing bubbles rise -- then burst. When financial markets panic and interest rates on sovereign Greek debt reach almost 18 percent, while rates on Italy's 10-year bonds creep above 7.4 percent, entire nations face dire financial realities.

Our understanding of thought contagions is often naïve. The common wisdom is that they are much like biological contagions -- flu, HIV, and SARS. In fact, just about the only thing they have in common with biological contagions is that infected actors must infect a sufficient number of others to keep the contagion going.

Unlike the carriers of many economic contagions, the carriers of biological contagions don't benefit from spreading them. In fact, disease carriers often become extremely sick. If you are infected with SARS or HIV, you are never a winner. At best, you're a survivor. Thought contagions often produce big winners in the people who start them. Traders frequently make a great deal of money when they spread panic, and politicians often win elections when their ideas take off.

Susceptibility increases when other people come into contact with individuals doing the same thing. When one person in a riot breaks a store window, or loots, others feel justified in doing the same. Or when a person attends a political meeting and the discussion turns to cutting entitlements or raising taxes, those who might be willing to compromise adopt rigid positions to join the crowd.

The Internet fuels the growth of thought contagions. We have long known that people gravitate to parts of the media that reinforce their beliefs. Liberals listen to NPR; conservatives tune into Rush Limbaugh and Fox News. We also know that being in like-minded company fosters and hardens pre-existing biases. Do a quick Google search and you're guaranteed to find a liked-minded group.

Thought contagions that turn into financial contagions are hardly new. There was tulip mania in 17th-century Holland, the South Sea bubble a century later, and the high-tech bubble at the end of the 1990s.

But the Internet is a cruel accelerator of both thought and economic contagions. Just as global air travel made biological contagions more of a worldwide threat, in an Internet-driven, overconnected world there will be many more thought contagions, with far more widespread consequences.

In the political sphere, my greatest concern is that Internet-powered thought contagions will support radical, uncompromising positions by both liberals and conservatives and violent civil unrest instead of peaceful protest. In the financial sector, I worry that these contagions of the mind will spread fear, uncertainty, and doubt. Not only will this make it more difficult to resolve budget and financial crises, the Internet will have failed to deliver on one of its greatest promises. Rather than bringing us together, it will be driving us apart. The situations men defined as real will have real consequences.

Image: Marc_Smith/flickr .

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