Collective Opinion Formation in a Business Climate Survey

A large body of literature has proposed models inspired by particle physics as formal-izations 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 con-sumers ’ confidence are mostly due to ‘animal spirits ’ rather than new information. PACS classification: 05.10.Gg, 89.65.-s, 89.65.Gh Collective Opinion Formation in a Business Climate Survey 1 As a simple formalization for the process of social opinion formation, we adapt an approach in the spirit of ferro-magnetism in physics [1, 2, 4]. The model assumes stochastic transitions of agents between two alternative states due to exogenous factors and group pressure. Let the two groups have occupation numbers n+ and n − respectively, with the overall population size being 2N. The aggregate outcome of this collective choice process at any point in time can be described via an opinion index: x