Collective opinion formation in a business climate survey

Abstract

A large body of literature has proposed models inspired by particle physics as formalizations of collective processes in the economic and social spheres of human societies [1, 2, 3, 4]. However, attempts at empirical validation of such models have been very sparse so far. This paper develops a broadly applicable methodology for estimating the parameters of microscopic models of social interactions. Its application to a popular business climate survey indicates that the collective behaviour of the survey respondents is well explained by a simple ‘particle’ model of social interactions. This result also lends support to the view that the large fluctuations of investors’ and consumers’ confidence are mostly due to ‘animal spirits’ rather than new information