Rational Herds
Economic Models of Social Learning

This book was the first in the exciting field of social learning.

Christophe P. Chamley (Author)

9780521824019, Cambridge University Press

Hardback, published 24 November 2003

418 pages, 68 b/w illus. 7 tables 61 exercises
25.4 x 17.8 x 2.4 cm, 0.94 kg

'Chamley has chosen a topic of great interest to all academics in the social sciences. The tendency of human beings to conformity intrigues social psychologists and anthropologists, and the implications of mass behavior are important in politics, economics, and finance. Chamley fully understands this material and conveys it clearly in this book.' Peter Norman Sorensen, University of Copenhagen

Penguins jumping off a cliff, economic forecasters and financial advisors speculating against a currency, and farmers using traditional methods in India are all practising social learning. Such learning from the behavior of others may and does lead to herds, crashes, and booms. These issues have become, over the last ten years, an exciting field of research in theoretical and applied economics, finance, and in other social sciences. This book provides both an informal introduction and in-depth insights into the subject. Each chapter is devoted to a separate issue: individuals learn from the observations of actions, the outcomes of these actions, and from what others say. They may delay or make an immediate decision; they may compete against others or gain from cooperation; they make decisions about investment, crop choices, and financial investments. The book highlights the similarities and the differences between the various cases.

1. Introduction
Part I. Social Learning: 2. Bayesian tools
3. Social learning with a common memory
4. Cascades and herds
5. Limited memories
6. Delays
7. More delays
8. Outputs
9. Networks and diffusion
10. Words
Part II. Coordination: 11. Guessing to coordinate
12. Learning to coordinate
13. Delays and payoff externalities
Part III. Financial Herding: 14. Sequences of financial trades
15. Gaussian financial markets
16. Financial frenzies.

Subject Areas: International economics [KCL], Macroeconomics [KCB], Economic theory & philosophy [KCA]