Monday, October 26, 2015

The Economic Influence of Social Information Networks in Decision Making

Our social networks influence how we perceive information and the economic decisions we make. As new information comes forth it naturally changes the market by changing our awareness and economic assumptions. Judgements are not as individualized as we once thought they were. We are social creatures and much of what we believe and do comes from our social networks.

Information influences our beliefs, our behaviors, and patterns of economic behavior. As information is obtained through our social networks we make decisions on that information by cross checking with others.Our decisions and opinions are only partly ours and instead rely heavily on others. Entire cities and countries will create opinions that lead to cultural behavioral patterns that influence economic outputs.

Many of these decisions rely on the non verbal communication patterns we engage in with others. Facial expressions, comment, and actions help us decipher the codes and languages that bind a culture together and determine our opinions. Much of what we do is embedded in our social network and we a biologically prone to seek out new information. 

Humans are social species that have interaction patterns that shape their behaviors and ways of looking at changes. According to a study in the Journal of Economic Perspectives the spreading of information and subsequent human behavior is based on the density of social clusters, how information is spread/received, and the actions/activities of others within those networks (Jackson, 2014).
Social Network (Jackson, 2014)

Consider how a new market leading invention soon spreads first to those within the specific field and adjusts how they apply knowledge to their working world. New information changes their assumptions and therefore adjusts their thoughts and behaviors. Those who rely heavily on market leading information are first to know and use this knowledge to an advantageous end before it is available for public consumption.

In the scientific fields information is often gained through word-of-mouth, data base sharing and academic journals. The networks become larger and more diverse as the industry and general population begin to be aware the discovery, talk about the discovery, and find new applications to their own needs. Information is received, compared and adjusted as it spreads through the network.

Whether we are discussing a scientific field or general public,  the process is generally the same. New information is heard, digested, compared within the network, formulated into an opinion, and then spread to other people thereby furthering its benefit. It fundamentally changes the market through changing our decision making process and the economic outcomes. Ground breaking ideas create "buzz" that spreads quickly.

Jackson, M. (2014). Networks in the understand of economic behaviors. Journal of Economic Perspectives, 28 (4).

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