Dear Economist,
Will somebody please explain to me the behaviour of my 12-year-old daughter? Every moment seems to bring some new craze. It was Justin Timberlake; now it’s Madonna. Can I do anything to persuade her to make her own decisions rather than join some irrational herd of pre-teens?
Yours sincerely,
Tom Jacobs, Winchester
Dear Mr Jacobs,
Youthful “crazes” may not be as crazy as you think. You describe an “irrational herd”, but what if the herd was perfectly rational?
Your daughter surely has her own opinion about the merits of, for instance, Mr Timberlake. Yet she realises that other girls hold valuable information about his strengths and weaknesses, and the listening pleasure afforded by rival entertainers. It would be foolish to ignore this information.
Rationally, your daughter will observe the music chart and real- time information such as the popularity of the songs on file- sharing software, or celebrity trackers such as the BBC’s “Celebdaq”. (Madonna is up 0.17 per cent over the past hour at the time of writing.) Each person who downloads a Madonna track confirms the quality of the music. The result can be a chain reaction as more people download, or, if no one follows the lead of these early adopters, it can be a flop.
An economically illiterate observer, such as the father of a music fan, might observe frenzies and crashes in the popularity of artists. He would not realise they were the result of each girl making sophisticated inferences about the information held by the others. Your daughter is clearly a gifted economist.
I recommend that you study the subject yourself. Not only would you understand your daughter better than before, you might even gain an appreciation of Madonna.
First published at ft.com.