A few weeks ago I participated in a panel on ethics at a ‘Future of Finance’ conference at Oxford’s Saïd Business School. An audience member asked our panel to comment on herding behaviour in banks, and since then I’ve been giving this issue some more thought. To what extent can human herding be explained in terms of the same goals that motivate herding in other social species?In human societies, herding often involves people using the actions of others as a guide to sensible behavior, instead of independently seeking out high-quality information about the likely outcomes of these actions. Herding can be particularly destructive in market contexts, because blind faith in market trends by a swarm of individuals can lead to huge bubbles and devastating crashes. But if herding can lead to outcomes that are so damaging and maladaptive at the level of the society, then why did it evolve in the first place? Because herding evolved to benefit individuals, not groups or societies.We’re used to thinking of social groups as fundamentally cooperative entities, but with some kinds of groups, nothing could be further from the truth. In fact, the best-known biological theory of herding, William Hamilton’s “selfish herd” idea [1], proposes that herds are the result of individuals trying to ensure that other members of their species, rather than themselves, will get eaten by predators. According to this theory, in many social aggregations, the risk of predation is higher at the periphery than at the center. A herd’s form and movement can be the result of individuals competing to stay close to this center, so that other individuals end up between themselves and the predators. Selfish herds have been proposed to occur in many different species, from wasps to guppies to sheep [2-4].Read more at Psychology Today
