Market Contagion: Imitation and Suggestion in Financial Markets

With some important exceptions, a reading of central contributions to financial economics – i.e. economic theory about financial markets – easily lends the impression that the central axiom constituting this field is the notion that markets consist of a multiplicity of actors, each conceived of as a homo economicus. One important exception to this picture is behavioural finance, a field that has been booming since the 1990s, and which argues that market actors should not be seen as isolated, profit-maximizing individuals, but rather, more ‘realistically’, as subjects whose market decisions are prone to be influenced imitatively by others. By emphasizing this imitative aspect of market activity, behavioural finance seems to place itself at the opposite pole of ‘mainstream’ financial economics: while the latter is indebted to an anti-mimetic position, the former subscribes to a mimetic framework. In this paper, we wish to argue that this strong opposition is misleading. On the one hand, a close reading of the behavioural finance literature suggests that this field is more indebted to anti-mimetic thinking than its proponents like to recognize. On the other hand, mainstream financial economics itself seems more committed to mimetic ideas than its advocates and critics acknowledge. What transpires, in other words, is the notion that financial economics, across its internal divides, seems united in a tension between mimetic and anti-mimetic strands of thinking. In the presentation, we discuss various instantiations of this tension, just as we examine traces of its emergence by focusing on ideas associated with late-nineteenth-century theories of suggestibility (Sidis, Tarde, etc).