The costs of suppression

The fall of Harvey Weinstein reminds me of an important phenomenon in the social sciences – that of preference falsification, as described by Timur Kuran.

Recall another despot, Nicolae Ceausescu. For years, he faced little dissent because people were afraid to speak out. Fearing that their friends or neighbours would shun them or denounce them to the secret police, Ceausescu’s critics kept quiet. They falsified their preferences. And because dissent was so rarely heard, others also kept their own hatred of Ceausescu to themselves. There was an equilibrium of silence: millions hated Ceausescu but kept quiet which incentivized others to keep quiet.

That equilibrium lasted for years, but it was brittle. When Ceausescu gave a speech on December 21^st 1989 a few in the audience began to jeer. This emboldened others to express their true opinion and within days Ceausescu was dead.

There’s a parallel here with Weinstein. As the New Yorker says:

Previous attempts by many publications, including The New Yorker, to investigate and publish the story over the years fell short of the demands of journalistic evidence. Too few people were willing to speak, much less allow a reporter to use their names, and Weinstein and his associates used nondisclosure agreements, monetary payoffs, and legal threats to suppress these myriad stories. 

As with Ceausescu, however, when one or two did finally call him out in public, others were emboldened to do so. And like Ceausescu his fall was swift after being so powerful for so long. When people suppress the truth, writes Kuran, “deceptive stability and explosive change are thus two sides of a single coin.” (Private Truths, Public Lies, p21)

One corollary of this is that persistence is not necessary a sign of sustainability or efficiency. Dysfunctional structures – Ceausescu’s tyranny or Weinstein’s domination of the film industry or Fred Goodwin's RBS – can persist not because they have hidden benefits or because their leaders are geniuses, but because of the brittle equilibrium of false preferences.

Something similar happens in financial markets. Just as people suppress their opposition to a tyrant because they believe others support him, so investors can suppress their doubts about an asset’s value if they see others buy it. In this way, bubbles can emerge – as we saw in tech stocks in the late 90s and credit derivatives in the mid-00s. And just as one or two voices of opposition to a tyrant can trigger an avalanche of opposition that brings him down, so can a few otherwise innocuous pieces of news trigger a crash. Information cascades work in both directions.

You might think that all this amounts to an argument for freedom of expression and cognitive diversity, of the sort expressed by John Stuart Mill or Nick Cohen. True. But it also reminds us that the enemies of that diversity don’t lie only in the state. The Weinstein affair reminds us that men in the private sector can also achieve power and wealth by suppressing freedom. And, in fact, self-censorship can also sustain inequality, inefficiency and injustice.

A clarification. I’m not of course trying here to tell the full story of Weinstein or Ceausescu. I’m simply highlighting one particular mechanism. The social sciences are, in essence, an inventory of mechanisms.

Comments

[Patrick Kirk]

Thanks for introducing me to the idea of preference falsification. In another context, the difference between opinion polls and actual election polls might well be another example of preference falsification. People swear blind they will never vote for Jeremy Corbyn and then when forced to act, ofc they voted for him. Same with the 2015 election and people saying they would never vote Tory. It makes opinion polls very hard to believe if its an accurate model of oru behaviour.

https://en.wikipedia.org/wiki/Preference_falsification

[AP]

Difference between Private knowledge vs Common knowledge
It’s not what the crowd believes. It’s what the crowd believes that the crowd believe.

Weinstein, Ceausescu, Markets, naked Emperors or Trumps obsession with inauguration crowds, common knowledge rules over society because all power systems rest upon legitimation.
https://en.wikipedia.org/wiki/Common_knowledge_(logic)

[Tony M]

"so investors can suppress their doubts about an asset’s value if they see others buy it"

This is true. But it is also true that many investors shared the doubts but assumed that they were smarter than everyone else and could get out before the collapse. I think from the 90's on a trader mindset took hold where the underlying attributes didn't matter - the price did. No one cared of a price was justified or sustainable as long as they could get in and out at the right time.

[Rich]

Jesus Christ talk about over-intellectualization for a phenomenon that occurs in the workplace everyday. Basically it only takes one other person to stand shoulder to shoulder with the lone voice to defeat the bully or the boss. Except as a gross contradiction, we have people siding with The Trump, The Jerry Jones, The Bigoted white people and The Idolatrous Soldier/Flag Worshippers, well, because the boss, because the corporation, because you're an employee.

[Jim]

Or more likely is that now Hillary Clinton and Barack Obama aren't in positions of power anymore, or requiring his money raising capabilities in their attempts to gain power, he's been thrown to the dogs. Funny how it all comes out now, do we really think that if Hillary was in the White House all this would be plastered over the media, given his links to her and St Barry?

[Joseph Wright]

@ Jim. Conspiracy theorists not welcome here.

[Blissex]

«introducing me to the idea of preference falsification»

Perhaps to the term "preference falsification", because the idea is quite ancient, as expressed in the ancient tale "The emperor's new clothes". Truth comes out when someone asks "But why is the emperor naked?"
Any implied references to the derivatives "markets" and 2008 entirely intentional :-).

[Blissex]

«Conspiracy theorists not welcome here.»

Not even Adam Smith, who had the theory that men of business when they come together always end up conspiring against the public?

[Blissex]

BTW, my usual point of view: look also at the *benefits* of suppression, and in particular at who benefits. In the case of Caesescu obviously himself, even if it ended quite badly for him, but consider also his family, followers and accomplices.
In the case of derivatives speculators, themselves and their accomplices.
Equilibriums of silence may be brittle, but indeed they often last many years, and during those years they make a lot of money for their beneficiaries, who then have every interest in maintaining those equilibriums of silence and making them thus less brittle.