Socionomics studies social mood and predicts changes in areas such as the economy, politics, fashion, and pop culture. It looks at the root causes of accidents and creates tools to anticipate them. Social mood influences events, but events have no impact on the direction of social mood. Socionomics fits better into the thinking patterns of a behaviorist.
Socionomics is the study of social mood and resulting social actions. Theories have been used to analyze waves of social mood and predict changes in areas such as the economy, political preferences, financial markets, fashion and pop culture. Socionomics predicts the direction of social mood and its effects, but does not predict the actions of specific individuals or the occurrence of specific events. For example, it predicts whether the market will be bullish or bearish, but it doesn’t predict whether a particular investor will buy or sell a particular stock.
The social mood is constantly changing from positive to negative and back to positive. Positive social mood translates into positive social events like bull markets, re-election of government officials, peace, and miniskirts. Conversely, negative social mood leads to bear markets, the toppling of incumbent politicians, strife, and longer skirts and pants.
Unlike industries where experts focus on the effects of actions, socionomics looks at the root causes of accidents and creates tools to anticipate them. As such, theories of socionomics often contradict traditional views. For example, mainstream analysts say that recessions cause businesses to act cautiously, but sociologists believe that cautious businesses cause recessions. Traditional wisdom teaches that scandals outrage people, but socionomics theories point the finger at outraged people who seek out scandals.
According to socionomics theories, social mood influences events, but such events have no impact on the direction of social mood. Social mood is governed by the wave principle, which theorizes that social mood, and therefore social action, follows a pattern. Ralph Nelson Elliott, who created the wave principle, modeled the price movements of the financial market index and found that the market follows a wave pattern. Elliott believed that market sentiment induces a five-wave bull market and a three-wave bear market.
Far from being a financial theory, socionomics fits better into the thinking patterns of a behaviorist because it analyzes how market psychology influences crashes. Robert Prechter, who is considered by many to be the modern guru of socionomics, has a degree in psychology, not economics. Despite his lack of a financial background, he won awards for market timing during the 1980s bull market in the US. His predictions about stock market prospects after the 1987 crash met with similar success. Socionomics shouldn’t be seen as a miracle formula for predicting the market, however, since Prechter generally underperformed a US stock market index by 25 percent every year from 1985 to 2009.
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