Socionomics

Socionomics: the study of social mood on economics and society.

In ye olden days, it was thought that people react to events, such as a rising or falling stock market. But socionomics thinks that, instead, people themselves are creating these events. So...things like the stock market, and what politicians do and say, is a reflection of social mood.

Socionomics first came to light via market analyst Robert Prechter with his Elliott Wave Principle in the 1970s. Under socionomics, an increase in ESG (environmental, social, and governance) investments shows an increase in consumer demand for more responsible investing. Likewise, the themes and narratives coming from politicians, movies, and TV shows are a reflection of the public’s current interests, desires, and fears.

Since stock markets can change at the drop of a hat, they’re often used in studying socionomics theories and trends. Prechter’s main schtick was this: sure, the efficient market hypothesis is a thing when there’s complete information...but in reality, there isn't complete information. Investors are unsure of what others will do and are working with asymmetric information, which creates dynamic waves and herd-like mentalities that produce larger macroeconomic trends.

Prechter’s Elliot Wave Principle proposes that natural fractal patterns can be seen in markets, and that they are inevitable. Just as inevitably as there are seasons in nature, Prechter believes in the inevitability of market booms and busts.