The Socionomist A monthly publication designed to help readers understand and prepare for major changes in social mood

April 2012
3 Year Anniversary

Dear Reader,

To celebrate our three-year anniversary, The Socionomist’s writers

and editors compiled the nine excerpts in this PDF on behalf of
a simple idea: to show that socionomics has a great story to tell.

Our team works hard to make our narrative accurate above

all – which means our stories invariably include the same
counterintuitive twist: that social mood drives social actions.

This does make storytelling more difficult, because most people

believe the reverse: that actions are the cause and mood is the
effect. That’s why our narrative will never appeal to readers who
will be satisfied only by convention.

But to provide that would make us fiction writers. You deserve

more credit than that.

Please enjoy these excerpts from The Socionomist.

Sincerely,

Mark Almand
Director, The Socionomics Institute

PO Box 1618 • Gainesville, GA 30503 USA A publication of the Socionomics Institute

770-536-0309 • 800-336-1618 • FAX 770-536-2514 www.socionomics.net © 2012
SOCIONOMICS
INSTITUTE
 HIGHLIGHTS FROM THE FIRST THREE YEARS

1. Asset Bubbles Don’t Surprise Socionomists . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

2. The War Over Drugs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

3. Why a Well-Known Scholar Embraced Socionomics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

4. Rising Social Mood Steals Tea Party’s Thunder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

5. Authoritarianism Simmers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

6. A Game of Thrones: Almost Everybody’s a Bad Guy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

7. Post-Crash Reality: Gimme Shelter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

8. Shechtman Scaled Walls of Skepticism En Route to Nobel Prize . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

9. Social Mood Regulates the Popularity of Stars. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

10. Paternalism in Washington: One Big, Happy Family? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

11. The Education Industry Is Traversing a Broad, Multi-Decade Social Mood Peak. . . . . . . . . . . . . . . . . . . 17

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 The Socionomist—Highlights from the First Three Years

Alan Hall describes how conventional analysts talk about bubbles after they have burst. It made me recall what a
conventional analyst said in the Wall Street Journal in the late 1990s, right before the decade when TWO financial
bubbles blew up. That gentleman asserted, “This expansion will run forever,” and he also single-handedly outlawed a
recession and bear market: “We don’t want one, we don’t need one, we won’t have one.... Our policy team will keep
it from happening.... The market won’t melt down.” With a “before” like that, the “after” below will be no surprise
(from the July 2010 Socionomist).

Asset Bubbles Don’t Surprise Socionomists

By Alan Hall

Most people—including Alan Greenspan, Ben Bernanke and the lion’s share of economists—think that it is
impossible to predict asset bubbles. For example, a June 10 [2010] article in the Harvard Business Review (HBR),
“Why Asset Bubbles Will Always Surprise Us,” starts like this: “It would be nice if we could predict bubbles; even
nicer if we could prevent them.”
We can predict bubbles. In fact, socionomics predicted the biggest asset bubble of all time a decade before it
inflated, as the following quotes from The Elliott Wave Theorist demonstrate:

• November 1982: “Make no mistake about it. The next few years will be profitable beyond your wildest
imagination. Make sure you make it while the making is good. Tune your mind to 1924.”
• April 1983 Special Report: “In 1982 the DJIA finished a correction of very large degree. The evidence for
this conclusion is overwhelming …. The advance following this correction will be a much bigger bull market
than anything seen in the last two decades …. as the last hurrah, it should be characterized at its end by an
almost unbelievable institutional mania for stocks and a public mania for stock index futures, stock options,
and options on futures …. Investor mass psychology should reach manic proportions, with elements of 1929,
1968 and 1973 all operating together and, at the end, to an even greater extreme.”
• August 1983 Special Report: “With sentiment, momentum, wave characteristics and social phenomena all
supporting our original forecast, can we say that the environment on Wall Street is conducive to developing
a full-blown speculative mania? In 1978, an Elliott analyst had no way of knowing just what the mechanisms
for a wild speculation would be. ‘Where’s the 10 percent margin which made the 1920s possible?’ was a
common rebuttal. Well, to be honest, we didn’t know. But now look! The entire structure is being built as
if it were planned. Options on hundreds of stocks (and now stock indexes) allow the speculator to deal in
thousands of shares of stock for a fraction of their values. Futures contracts on stock indexes, which promise
to deliver nothing, have been created for the most part as speculative vehicles with huge leverage. Options
on futures carry the possibilities one step further. And it’s not stopping there …. At the peak... the spectacle
could rival Tulipomania and the South Sea Bubble.

Socionomics both recognized the asset bubble in its infancy and described its maturity. As far as we know, it is
the only financial, economic or sociological theory to do so.

Can We Prevent Bubbles?

Calls for financial fixes and regulation always follow large-degree fifth waves. Today’s regulatory clamor is just
the beginning. The author of the HBR article also proposes ways to prevent asset bubbles, specifically:

• Make sure public leverage does not become excessive.

• Identify sources of “hidden leverage.”
• Impose shorter term limits on certain public officials, for example the chairman of the Federal Reserve.
• Develop methods to recapitalize the financial system more quickly.
• Develop better corporate governance protocols.

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 The Socionomist—Highlights from the First Three Years

Observe that these prescriptions did not pre-date the
asset bubble or even its bursting. Socionomics predicts
bubble-prevention articles to appear after bubbles, not
before them.
Even if prevention were possible, it is already too
late.... [Yet] there is a deeper issue, which is that none
of the HBR article’s well-intentioned suggestions can
work. During a euphoric social mood advance, very few
CEOs, politicians, regulators or ratings agencies are mo-
tivated to investigate excessive or hidden leverage, limit
the term of a central-bank maestro, investigate financial
fraud, rein in banker’s speculations, set aside capital as
deflation insurance or tighten corporate governance.
Social mood prevents such pre-emptive solutions. As
socionomists...have shown, regulation simply does
not happen when social mood is rising and inflating
a bubble. The mechanistic “throttle” that Keynesians
believe can regulate the economy doesn’t exist, but even
if it did, authorities would never use it as theoretically
intended. History repeatedly demonstrates that human
passions will not decelerate or accelerate on command.
Unconscious social mood is the engine, and it has no
exogenous throttle.

Richard Nixon was the first U.S. President to declare a “war on drugs.” But four decades later, drugs have still not
surrendered. In the more recent past—just five years ago—Mexico’s President also declared his own war on that
country’s drug cartels. This has since led to a death toll of 47,500 Mexicans (CBS News, NPR). The excerpt below
from the July 2010 Socionomist considers whether there is any end in sight.

The War Over Drugs

Is There Any End in Sight?

“The Coming Collapse” [The Socionomist, July 2009] compared drug-related violence in Mexico to Chicago’s
gang wars of the 1930s. Euan Wilson predicted a dramatic escalation in bloodshed and, eventually, cries for legal-
ization to end the killing, just as happened with the earlier prohibition.
Wilson’s forecasts are unfolding in sequence. At press time, the Mexican border region is reeling from two
shocking drug-related attacks. A particularly sinister car bomb incident, the country’s first in this drug war, occurred
July 15. Gang members dressed a wounded man as a police officer and left him on the street in Ciudad Juarez. Then
they called emergency services, luring real police to the scene. When the first responders arrived, the executors
triggered the car bomb and killed four people—including two police officers—and wounded another 11. Mexican
police blame La Linea, an armed wing of the Juarez cartel. The Christian Science Monitor said that with the attack,
the “Columbianization” of Mexico is nearly complete.
Then on July 18, five SUVs full of what Reuters referred to as “hitmen” rolled up to a birthday party and opened
fire. The killers murdered at least 17 people and wounded another 18, most of them in their 20s. The birthday boy,
who was among the victims, has been identified only as Mota, Mexican slang for “marijuana.” The massacre took
place in Torreón, a city about 200 miles from the Texas border.
Violence in the region is reaching such extremes that Tony Payan, a political science professor at the University
of Texas at El Paso, told Bloomberg that residents in the border town of Ciudad Juarez are abandoning homes. The
town was the location of another birthday party shoot-’em-up back in January. Some 2,600 murders were reported
in Ciudad Juarez in 2009, an average of seven a day. Drug violence in Mexico claimed 9,000 lives nationwide in
2009, but it has already accounted for 7,000 deaths in the first six months of [2010].
Like Prohibition-era bootleggers, the bad guys here are gangs of thugs competing for smuggling routes into
lucrative markets. A year ago Wilson predicted that the violent battles would edge ever closer to U.S. borders and
then spill over in a full-scale gangland turf war. Wilson predicted that California, Arizona, New Mexico and Texas
would see the kind of horrors then plaguing Mexican states. In late May, the AP reported that fishermen in Falcon
Lake, on the Texas-Mexico border, have been robbed at gunpoint by “pirates.” The local sheriff called the attacks a
byproduct of fighting between Mexican drug gangs. In early June, the U.S. and Mexico were engaged in a dispute

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 The Socionomist—Highlights from the First Three Years

over the death of a Mexican teen—allegedly shot for
throwing rocks at U.S. border patrol agents.
On the U.S. side of the border, the call for legaliza-
tion is growing. Oakland, Calif., has become the first
U.S. city to impose a special tax on medical marijuana
dispensaries. In July the Oakland city council voted to
legalize large-scale marijuana cultivation for medical
use and will issue up to four permits for “industrial”
cultivation starting next year. According to Reuters,
the strongest opposition to the vote came not from the
anti-pot crowd, but from small-scale growers who fear
they’ll be squeezed out of the marketplace. In Berkeley,
the city council met in July to discuss adding a medical
marijuana tax to the city’s November ballot.
In fact, the Bay area is so supportive of legalizing
marijuana that in late June the pot-friendly countercul-
ture magazine High Times hosted its first Cannabis Cup
on American soil, in San Francisco. The publication
has held a similar event in Amsterdam for the past two
decades. Prizes were awarded in several categories to
medical marijuana growers. Although several states
have legalized medical marijuana, selling and growing
it remain illegal under U.S. federal law.
All of this is simply background for what’s to come,
Wilson says. As drug violence progresses north of the
border, he wrote a year ago, “the dialogue about mari-
juana decriminalization will cease to center on morality
and instead will shift to stopping the … bloodshed.”
As to the drug war itself, “‘Mexican violence’ is be-
coming ‘Mexican violence on American soil,’” Wilson
warns. “At first, the U.S. response will be to push back
with force, perhaps even with the military. But later as
the bear market continues, advocates will say it’s time
to give up on trying to cut off the supply of drugs and
go for what they believe is the root cause of the mayhem
and deaths: drug ‘prohibition.’”

The interest in socionomics grows by the day. The past two to three years especially have seen scholars and profes-
sionals in finance, psychiatry, statistics, computer science and beyond investigate how social mood trends drive
social actions. Yet as you’ll discover in this interview with Dave Allman, scholar and mathematician John Casti was
one of the very first academics to grasp how profoundly relevant mood is to collective behavior. Excerpt from the
September 2010 Socionomist.

Why a Well-Known Scholar Embraced Socionomics

Q: I’d like to discuss some of your older material before we get to Mood Matters. You were talking about “so-
cial behavioral patterns” back in 1989, for example in Paradigms Lost. What a great title, and with a jacket
quote from Isaac Asimov no less!

A: That book was a collection of about six mini-books, each one addressing a major unsolved problem in modern
science. One of the unsolved problems was the “nature-versus-nurture” question. That is, to what degree is
human behavior genetically programmed in—as opposed to the dominant influence being the environment in
which you live? In those days the topic was called “sociobiology.” In its more modern incarnation, it’s usually
termed “evolutionary psychology.” The book didn’t come to any definitive conclusions. My objective was to
look at these big questions of modern science and the competing paradigms and see who holds which positions
and why. Just for fun and to make it easier to read, I structured each of the questions as a kind of jury trial. I
presented the prosecution and defense.

Q: In Mission to Abisko (1997), another compilation, you touched on something that you do very well—the
popularization of science, making it accessible to the masses. Should this be a main goal of socionomists—to
explain ideas in a “Popular Science” way?

A: I guess it depends on your tastes in these matters. As you mentioned, my own tastes are to make things as
clear as possible. In fact, I have chosen most of my books’ topics not because I am an expert on them. Instead,
I wanted to understand those questions more deeply myself. I thought that one of the best ways I could come

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 The Socionomist—Highlights from the First Three Years
to understand them was to try to explain them to
somebody else. Almost all the books I have written
have that character. With socionomics, I received
a lot of feedback on the manuscript from friends
and so on. I kept sharpening and sharpening my
view of the whole topic.
Eventually I was able to convey it with almost
an outsider’s inside perspective. It was especially
difficult in the case of socionomics because, as you
know yourself, you have to ask people to suspend
their disbelief about the way the world actually
works. And that is a pretty tough requirement.
Q: Especially for people who spent a small fortune to
be indoctrinated into traditional economic thought,
for example.
A: Right. I must have given in the order of 100
presentations about socionomics since my first
article about it in New Scientist nine years ago.
I’ve spoken about it in pretty much every corner of
the world. Almost without exception, the reaction
is very encouraging and positive. I think that Bob
Prechter would probably tell you the same story.
But, having people tell you, “Gee, it caused me to
think differently about everything” is not the same
thing as people saying, “I changed my mind about
this particular belief I once held.” This notion that
events cause people to feel a certain way or that
events drive social mood is so deeply wired into the
human mindset that it’s almost impossible for some
people to abandon it. In fact, even though audiences
on the whole are encouraging about socionomic
observations, I have also had people in the audience
who were so bothered and so troubled by the idea
that underlies socionomics—that mood is the
factor for events, not the other way around—that
they were unable to even discuss the matter in a
rational way. And these were academics, who are
supposed to rely on scientific observation to arrive
at their conclusions about the world. Some became
angry and stomped out of the lecture room, some
slamming the door on the way out . revolution or terrorist attack is more likely to take
Q: Yeah, I get that at home. Well, at least you know
you were heard! So, do you think that there are bet-
ter sociometers than the markets?
5
A: I do not think that we will find any with all of
the very useful properties of the financial markets. I
do wish that we could measure mood directly with
brain probes because it would make life infinitely
easier for expositors of socionomics. Then nobody
would imagine that Mood Matters is about financial
markets. I wish I could have used all the same
charts in Mood Matters, but not labeled them as
movements of the financial markets. I wish I could
have just labeled the vertical axes “social mood”
and left it at that.
Q: The whole forecasting business doesn’t forgive
easily.
A: These days, most of the people who are serious
about forecasting do not put themselves in the
position to get trapped... Even if you had a 100
percent surefire method of forecasting specific
events, which no one does, you then face bigger
challenges. Number one: who do you tell? And
number two: how do you get them to take action?
These are not scientific questions: They are social,
political and psychological issues that reside far
outside the laboratory. I am head of a project at our
Institute that has the grand title, Extreme Events
in Human Society. The focus of the project is
to acquire insight into the likelihood of human-
generated extreme events, like the financial crises,
terrorist attacks, political disturbances, a revolution,
and so on. When I first set up this project, I said:
“We are not going to be in the business of making
point-in-time forecasts like, ‘This country is going
to have a revolution at this time and such and such a
party is going to come into power.’” Such forecasts
are lunacy; nobody can do that. To even hold out the
prospect that you can borders on scientific fraud.
On the other hand, you can shed light on the
environment within which events unfold and say
that when the environment is in a certain state it
biases the likelihood or unlikelihood of events of
a certain type. So for example, you can say that a
place in a period when you have a particular social
mood than at other times. This is why socionomics
is very important.
 The Socionomist—Highlights from the First Three Years

We know that the Tea Party was born of the same negative mood that drove the 2007-2008 bear market and financial
crisis. But, what explains why that movement has all but disappeared from the political headlines—especially since
the coming presidential election is only 6 months from now. The Socionomist both asked and answered that question
nearly a year ago (May 2011). Here’s an excerpt from that month’s issue.

Rising Social Mood Steals Tea Party’s Thunder

By Alan Hall

Socionomic theory predicts that a trend toward more positive social mood will reduce the general level of fear,
increase confidence and prompt stock-market buying. In line with this prediction, the two-year social mood rise has
doubled the Dow Jones Industrial Average, slackened society’s fear and boosted its confidence. This article looks at
three in-depth examples of the two-year change toward a more positive tenor of social mood expression, beginning
with society’s shift in attitude toward the Tea Party.
The Tea Party movement was born in the negative mood climate of anger around the March 2009 low in the
stock market and continued to simmer throughout 2010. However, the Tea Party movement lost popularity, accord-
ing to CNN and Pew Research Center polls, as social mood continued toward the positive. It’s as if people viewed
the Tea Party’s anti-big-government aims and thought, “Things are getting back to normal; maybe we don’t need
drastic reform.” And even, “Let’s raise the debt ceiling again.”
March 2009 [saw a] negative extreme in social mood. That is when the Tea Party began nationwide protests and
adopted the Gadsden Flag—originally an emblem of colonial America’s angry revolt against British rule—as its
symbol. Indeed, the Tea Party seems to have greater appeal when people are angry and fearful. Subsequent spikes in
Google searches occurred on tax and election days, when news reference volume (not shown) peaked. But in general,
as social mood continued to rally in late 2010, interest in the Tea Party... waned.
Dale Robertson, a Tea Party activist and self-proclaimed founder of the movement, exemplified the angry mood in
February 2009 by displaying a highly polarizing sign. The Tea Party mainstream has distanced itself from Robertson;
Robertson himself now presents a far more diplomatic face in a recent video interview at teaparty.org. The Tea Party’s
proponents in Congress have also tempered their vitriol in the elevated social mood environment. ABC News reported
on April 20, 2011, “They swept into power on a wave of popular enthusiasm less than a year ago, but it’s not so easy
being a Tea Party Congressman these days.” One freshman Tea Party House Representative says, “I desperately want
to vote ‘no’” on raising the debt ceiling, but “I also desperately don’t want [the economy] to crash.”
In March 2011, the rebound in social mood led to the highest-ever levels of unfavorable views of the Tea Party
movement....political commentator Nate Silver recently wrote, “If the Tea Party ain’t over yet, the point in time at
which it was an electoral asset for Republicans soon may be.”
Joshua Green, editor of Atlantic magazine, wrote on May 12 that the Tea Party
appears to have reached the limit of its influence in Washington. [It] is looking like a spent force. … Glenn Beck is
waning. Sarah Palin’s presidential hopes are passing into rapid eclipse. Even Representative Michele Bachmann of
Minnesota—founder of the congressional Tea Party caucus … —has begun cautiously backing away.

Such “spent force” prognostications are likely to be wrong because they linearly forecast the present. That is,
they “predict” a Tea Party popularity decline that has already happened due to rising social mood. Socionomists,
however, strive to forecast social expressions such as the Tea Party movement long before they are evident in polls.
For example, this forecast from the September 2001 issue of The Elliott Wave Theorist that Robert Prechter made
because he anticipated a coming trend of negative social psychology:
Political manifestations will include protectionism in trade matters, a polarized and vocal electorate, separatist move-
ments, xenophobia, citizen-government clashes, the dissolution of old alliances and parties, and the emergence of
radical new ones.

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 The Socionomist—Highlights from the First Three Years

If social mood turns down again, as EWI expects,
rising anger will reheat the Tea Party movement or oth-
ers like it. Such potential is already evident in Europe,
where Spiegel writes, “If a European version of the
American Tea Party movement develops, it could very
well become the kiss of death for the euro.”
William Temple, chairman of the Tea Party Found-
ing Fathers, recently complained in the Washington
Post, “Instead of a fighter for U.S. taxpayers, [Repub-
lican House Speaker] Boehner has been a surrenderist.”
Socionomists can explain this change: Increasingly
positive social mood has altered the political forces that
were so favorable to the Tea Party two years ago.

Each passing week brings new news about the escalating battle between authoritarians and anti-authoritarians:
Witness the April 2 Supreme Court ruling which said prison officials “may strip-search people arrested for any of-
fense, however minor, before admitting them to jails even if the officials have no reason to suspect the presence of
contraband.” If you missed that story, read on to learn what other stories you may have missed (plus the socionomic
context). Excerpted from the June 2011 Socionomist.

Authoritarianism Simmers
Privacy Legislation is Curtailing Internet Use; and ‘Financial Repression’ is Reemerging
By Alan Hall

The financial markets have rallied. But in keeping with the larger-degree negative trend in social mood that began
in 2000, authoritarianism and the backlash against it continue to grow.

Broader Internet Controls

The U.S. Congress continues its campaign to control the Internet. The Preventing Real Online Threats to Economic
Creativity and Theft of Intellectual Property Act (“PROTECT IP Act”) threatens “domain seizures, ISP blockades,
search engine censorship, and cutting funding of allegedly copyright infringing websites,” taking Internet censorship
to the next level.
In the U.K., the conflict is evident in a pitched battle between privacy legislation advocates and those who sup-
port Internet freedoms. “Super-injunctions” are legal gag orders that prohibit the British press from reporting details
of secret information or even the existence of the injunction. “Hyper-injunctions” go a step further and prohibit
divulging information to journalists, lawyers or members of Parliament. But try getting Twitter and Facebook users
to play along:
The internet backlash against super-injunctions continued to grow yesterday as the identities of celebrities who are
said to have taken out gagging orders were revealed on Facebook.

Amid calls for Parliament to develop stronger privacy laws, anti-authoritarian sentiment is plain to see:
One [Facebook] poster said it was “wrong” that wealthy celebrities were allowed to use Britain’s courts to hide details
of their private lives. He said, “It is awesome that they are being exposed.”

The Destructors
In Chapter 14 of The Wave Principle of Human Social Behavior, Robert Prechter noted the tendency for posi-
tive social mood to impel the desire to build and for negative mood to impel the desire to destroy. Lately, the hacker
group Lulz Security (Lulz means “laughter at someone else’s expense”) has garnered headlines for successful attacks
on prominent properties such as the CIA’s website. According to the BBC, LulzSec “opened a telephone request
line so its fans can suggest potential targets.” At first, LulzSec and others like it (for example the hacker group
“Anonymous”) mostly seemed like kids out to have some fun. But with their devastating attacks on Sony, and the
recent release of confidential Arizona Department of Public Safety documents, LulzSec has emerged as the latest
WikiLeaks wannabe.... As we said in the March 2010 issue of The Socionomist, “Socionomists expect cyber attacks

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 The Socionomist—Highlights from the First Three Years
to become both more prevalent and increasingly vicious
during bear markets.”
Financial Controls
The temptation for governments to impose other
forms of control has increased as well. For example, a
buzz phrase from the 1970s bear market has re-emerged:
“financial repression.” A new academic paper analyzes
how heavily indebted governments have attempted,
throughout history, to squeeze indirect tax revenue from
their citizens. According to the authors, some of the
mechanisms the governments employed include:
1. Explicit or indirect caps or ceilings on interest
rates, particularly ([though] not exclusively)
those on government debts.
2. Creation and maintenance of a captive domestic
audience that facilitated [and] directed credit to
the government.
3. Direct ownership [by the government] … of
banks or extensive management of banks and
other financial institutions.
The U.S. financial system exhibits each of these
features. Consider:
1. The Federal Reserve’s loan rate remains near
zero.
2. The U.S. Treasury Secretary told Congress on
May 16, 2011 that “he would start tapping into
federal pension funds … to free up borrowing
capacity.”
3. The government owns large interests in several
major banks, lenders Fannie Mae and Freddie
Mac, auto/finance companies GM, Ford and
Chrysler, and the insurance company AIG.
Financial Control Backlash
Governments may soon face a far greater challenge
to their wealth and authority via private currency issues.
The September 2010 issue of The Elliott Wave Theorist
reported:
As distrust in central banks continues to increase as
the financial crisis drags on, the idea of private curren-
8
cies should grow in popularity. Cryptography expert
Satoshi Nakamoto has created the first completely
decentralized, anonymous, electronic currency, called
Bitcoin.
Rick Falkvinge is founder of the Swedish Pirate
Party, a political party founded in 2006 that strives to
reform copyright and patent laws and increase both
individual rights to privacy and government transpar-
ency. Falkvinge made an observation that is right in line
with the above comment and our May 2010 forecast
in The Socionomist that “governments will shut down
sections of the Internet.” On May 20, 2011, he wrote
on his website:
Here’s what’s on my radar: banking. There are at least
a dozen different variants of decentralized crypto-
graphic currencies and transaction systems out there,
very sophisticated and totally incomprehensible.
There’s Ripple, Bitcoin, ecash and others.
Just as BitTorrent made the copyright industry obso-
lete in the blink of an eye, these stand to make banks
obsolete. … The technology is there, the use case is
there—there’s certainly no shortage of annoyance
with big banking. It’s just a matter of usability now.
The governments of the world are on the brink of
losing the ability to look into the economy of their
citizens. They stand to lose the ability to seize assets,
they stand to lose the ability to collect debts … . All
the world’s weapons in all the world’s police hands
are useless against the public’s ability to keep their
cryptographic economy to themselves.
A Multifront Battleground
The potential for decentralized, uncontrollable information
systems and economies represents a huge threat to
governments. As the largest debt bubble in modern history
unwinds, socionomists expect to see many and varied
attempts to dial up the repression … and an intensification
of the inevitable backlash.
 The Socionomist—Highlights from the First Three Years

Context is everything when it comes to popular culture success, and context is indeed what permitted author George
R.R. Martin and HBO to take Thrones from a cultish niche book to a mainstream television phenomenon. Is the me-
dia right to call George R.R. Martin the “American Tolkien”? Perhaps, but know this: The “qualitative differences
between a bull market rally and a bear market rally” can show you the amazingly dissimilar sources of success for
the two authors. Excerpted from the July 2011 Socionomist.

A Game of Thrones: Almost Everybody’s a Bad Guy

....HBO named its new television adaptation of Martin’s novels Game of Thrones after the first book in his
series. The book series launched in 1996, became a niche cult hit and then saw its appeal jump mainstream in the
mood decline following the 2000 peak. In a 2005 book review, Time magazine’s Lev Grossman proclaimed George
R.R. Martin “The American Tolkien,” after John R. R. Tolkien, the English author of the immensely popular fantasy
classics The Hobbit and The Lord of the Rings. HBO filmed a Thrones pilot in 2009 but never aired it. HBO cor-
rected its error in March 2010 due to the novels’ rising popularity and committed to produce nine more episodes. In
January 2011, Thrones the book ascended to the New York Times bestseller list. In April 2011, the first TV episode
drew 8.7 million viewers; two days later, HBO committed to a second season. Subsequent episodes continue to hit
new-season viewership highs.
At first glance, it seems puzzling that such a dark and violent story grew more popular while social mood was
rising, but it is important to note that there are qualitative differences between a bull market and a bear-market rally.
The social expressions of the latter are noticeably darker. The recovery rally from October 1966–November 1968
is a good example:
When social mood [entered] a major bear trend in 1966, so did ground-breaking horror movies. Night of the Living
Dead debuted in 1968, the year after the last of that era’s Disney cartoon classics. It was so influential that it spawned
two sequels (both produced during the bear market), several derivations and two books.

The larger-degree mood trend was waxing negative during the 1968 rally, and this was evident outside the cinema
as well; the year is infamous for civil unrest, political violence and wartime atrocity.
Martin’s books now dominate Amazon’s top-ten best-seller lists in the U.S. and U.K., and Google searches for
“Game of Thrones” have increased 24,000 percent since May 2010. The HBO series has room to run, as Martin has
completed five lengthy novels in the series and is working on two more.
Tolkien was immensely talented, as is Martin. But talent and hard work alone cannot create an enduring cultural
icon. To attract and enthrall a vast number of receptive minds, a work of art also must harmonize with the collective
mood of society. Tolkien’s and Martin’s epics are cases in point.
According to Pioneering Studies in Socionomics, “Definitive morals and heroes accompany a bull market; blurred
morals and mixed heroes accompany a bear market.” Tolkien’s masterpiece was almost entirely a bull-market work. It
featured clear divisions between good and evil and a virtuous hero on a defining quest accompanied by good-natured
hobbits, dwarves and elves. As you might expect, his book trilogy became massively popular near the mid-1960s
Cycle-degree social mood peak—within a historic Supercycle bull market. The Lord of the Rings films—the highest
grossing motion picture trilogy worldwide of all time—hit theaters in 2001, 2002 and 2003 after eight years in produc-
tion, the entire process nicely bracketing the 2000 Grand Supercycle peak in social mood. Martin’s epic, in contrast,
is a decidedly bear-market work. In fact, it makes Tolkien’s trilogy appear to be a pleasant fairy tale in comparison.
It portrays a chaotic and unpredictable political struggle peopled with complex characters whose morals come in all
shades of gray. It visits and revisits the grisly details of such themes as betrayal, immolation, hanging, beheading,
amputation, poisoning, cannibalism, incest, disinherited bastard children, deformities and prostitution.

Looking Further at Thrones

“Everyone but us is the enemy,” declares the aphorism in the advertisement for Game of Thrones on page one,
capturing the spirit of opposition, fear and defensiveness that intensifies as society descends to a social mood low.
In fact, the line practically quotes the September 1992 issue of The Elliott Wave Theorist:

9
 The Socionomist—Highlights from the First Three Years

In other words, at a peak, it’s all “we”; everyone is a
potential friend. At a bottom it’s all ‘they’; everyone
is a potential enemy.
This attitude will get much worse, since now is not
a social-mood low.
Perhaps most important, Martin paints a picture of a
society fragmenting. Norms are normal no more. Even
the seasons seem fractal: Winters vary dramatically
in length and can last for a decade. Fear of a coming
winter rises, yet the negative mood precedes the actual
cold. New conflicts break old alliances, ancient grudges
rekindle and society grows increasingly polarized as it
slides inevitably into war.
Meanwhile, here in the real world, each month
brings headlines that seem to echo Thrones. As Time’s
Grossman writes, “Martin may write fantasy, but his
politic is all real.” In truth, of course, both life and
popular art are guided by a single, sure mood. From
the sagas of Saddam Hussein, Osama bin Laden and
Muammar Gaddafi, to the enslavement of Bangladeshi
workers in Dubai, to Saudi Arabia’s beheading of an
Indonesian house maid, to the rise of an American-led
mercenary army in the Arab world, to the ex-Governor
of California’s illegitimate child, to the widespread re-
surgence of spying—reality today seems to be edging
toward Martin’s fantasy.
Critical for socionomists is that his visions reflect
the emerging negative social mood trend. Personally,
after reading a few chapters of Thrones, it is difficult
to completely separate one’s feelings about Martin’s
fantasy from one’s feelings about the darker aspects of
the ambient social reality.
If EWI is right about the size and duration of the
bear market, Martin could very well become iconic. In
fact, the 68-year-old author may see it happen during
his lifetime.

Much has changed in America’s housing recently. Yet the most dramatic shift may be the market’s move away from
the realm of speculative investment and back to a place to call home. It’s likely that you (or someone you know)
understand this from first-hand experience. No surprise there; socionomists were predicting the shift more than a
decade ago. In this excerpt of the August 2011 Socionomist, Peter Atwater takes a fresh look at these connections.
One of the most practical reasons to look at any market through the eyes of its participants is to envision the sur-
prising possibilities for the future.

Post-Crash Reality: Gimme Shelter

By Peter Atwater
Posted near our home’s front door is one of my favorite family souvenirs. It is a simple metal sign that we bought
in the gift shop at the U.S. prison at Alcatraz. It reads:
Regulation #5—You are entitled to food, clothing, shelter and medical attention. Anything else that you get is a
privilege.

Beyond discouraging unwanted guests at our house, this posting of Regulation #5 serves as a reminder to all of
us of our most basic needs. I am afraid that our society has lost sight of this perspective, particularly now, just off
the peak of the greatest-ever Age of Aspiration.
In their landmark 2007 paper, “The Financial/Economic Dichotomy in Social Behavioral Dynamics: The So-
cionomic Perspective,” Robert Prechter and Wayne Parker noted that some economic goods can become viewed as
investments. They cited as examples tulips in Holland in the 1630s and Beanie Babies in the 1990s. They also noted
that at the time they wrote their paper, homes in the U.S. and elsewhere had “metamorphosed from economic goods
into vehicles for speculation as people buy them to ‘flip’ and trade options on their purchase.” Prechter and Parker
wrote:
When an item is generally viewed as a good to be used, it will have a certain value because individuals will know
how to value it over time for their own purposes. When an item is generally viewed as an investment, it will have
an uncertain value because individuals will not know how it will be valued over time by others. … [It] is an eco-

10
 The Socionomist—Highlights from the First Three Years
nomic good to any person who buys it to enjoy. …
[It] is a financial asset to a person who buys it with
the expectation of re-selling it at a higher price. He
does not know its value to other people, and he pays
a price that may or may not turn out to be useful in
the financial context of uncertain value.
TV shows such as Flip That House helped prove that
at its peak in 2006/2007, the U.S. housing market had
moved well beyond providing utility to become a full-
fledged speculative bubble. A house was not so much a
home as a key to future financial rewards.
What brought Regulation #5 to mind again recently
was a conversation with a friend in the high-end home-
building industry. He observed that fancy woodworking
had been pushed aside by his prospective clients for
“instant” hot water and variable-speed furnace fans.
His point was that ostentatious luxury, or boundless
aspiration, is being replaced by cost-conscious utility—
even at the upper end of the market. As Prechter and
Parker’s paper alluded, the housing market is chang-
ing from an investment market back to a market for a
utilitarian good.
This emerging trend is one piece of evidence that
the deflationary mindset is growing in America. Another
comes from the widespread move toward downsizing.
In a 2010 survey by the National Association of Home
Builders (NAHB), more than half the respondents said
they expect the living room to merge with other spaces
in the home—and 30% expect it to vanish altogether.
Other rooms that are least likely to be included in
future homes, according to the survey, are sunrooms,
hobby rooms, media rooms and second master bedroom
suites.
In fact, U.S. Census Bureau data shows that average
square footage of a new single-family home is already
declining sharply. It reached an all-time peak of 2,521
square feet in 2007, one year after the all-time peak in
11
home prices, as the homes commissioned and designed
in 2006 were completed. By 2010 average home size
had declined to 2,392 square feet—for the biggest three-
year decline in the Census Bureau’s data, which dates
to 1973. The NAHB survey mentioned earlier forecasts
(using linear extrapolation, unfortunately and natu-
rally) that square footage will decline even further—to
2,152—by 2015.
Prechter and Parker’s work postulates that the rever-
sal of the housing mania will bring a price environment
predicated, once again, on utility. Indeed, it seems to
me that in America our dwellings now are morphing
into something more akin to, well, shelters. I am sure
many in the housing industry will find this thought
frightening.
One real-time measure of “home as shelter” is the
rental market. People rent because they need a place to
live, not because they expect a dwelling’s value to go
up. And for now rents are maintaining their pre-real-
estate-top trajectory.
Admittedly, it is hard to imagine that housing will
go the full length as tulip bulbs did when they returned
to their utility-based price of 50 cents apiece in today’s
money. But I believe the greater danger is in underes-
timating the downward pressure still ahead as housing
continues to move toward a supply-and-demand equa-
tion based on Americans’ need for shelter.
Peter Atwater is the President and CEO of Financial
Insyghts LLC.
This article includes excerpts from an article by Peter
Atwater titled, “A Post-Crash Realty Reality: Home
as Shelter,” originally published by Minyanville.com;
excerpts reprinted with permission.
Imagine a story that begins when a scientist is told to
leave his job because he is “a disgrace,” yet which ends
29 years later when that same scientist is awarded the
 The Socionomist—Highlights from the First Three Years

Nobel Prize. There’s no imagining necessary, however, because this is more than a story: It describes the experience
of Daniel Shechtman. What’s more, the work that led colleagues to consider Shechtman a “disgrace” eventually
proved to be the breakthrough discovery that led to his Nobel. Excerpted from the October 2011 Socionomist.

Shechtman Scaled Walls of Skepticism En Route to Nobel Prize

By Andrea Dibben

In early 1982, the head of the laboratory where Daniel Shechtman worked came to his desk “smiling sheepishly.”
Shechtman recalls what happened next:
He put a [crystallography] book on my desk and said, ‘Danny, why don’t you read this and see that it is impossible
what you are saying.’ And I said, ‘You know, I teach this book. I don’t need to read it. I know it’s impossible, but
here it is. This is something new!’ That person expelled me …. He said, ‘You are a disgrace to our group. I cannot
bear this disgrace.’ And, he asked me to leave the group; so, I left. He was a good friend of mine.’

What had this Israeli scientist done to deserve the disdain of his colleagues? He had discovered quasiperiodic
crystals on April 8, 1982.
Shechtman later described them as “fascinating mosaics of the Arabic world reproduced at the level of atoms.”
Quasiperiodic crystals are regular; yet, they form non-repeating patterns that usually appear in aluminum alloys. X-rays
first revealed the internal structure of crystals in 1912; and from that time forward, scientists concluded that all crystals
possessed rotational symmetry and a periodic structure. This consensus held for more than 70 years. The accepted rule
was that there were only five possible rotational symmetries: single, double, triangular, quadruple and hexagonal. Forms
that were not regular and periodic (for example, the pentagonal form Shechtman identified) were deemed impossible.
When Shechtman first observed the five-fold symmetry, he thought it must be “twinning”—period crystals fus-
ing at an angle. Yet, when he looked for twins and twin boundaries, they were not there.1 “If you look at historical
materials, people probably had found quasicrystals before,” notes fellow chemist Patricia Thiel. “But they didn’t
have the tools or the gumption to say what they were seeing. Danny had both”....
The math behind Shechtman’s discovery dated from antiquity. Medieval Islamic artists used it in tile mosaics. But
instead of curiosity about a potential breakthrough, the scientific community—often lauded for constantly questioning
and innovating—effectively dismissed this new class of solid matter. Another Nobel laureate went so far as to say,
“Danny Shechtman is talking nonsense. There is no such thing as quasicrystals, only quasi-scientists.”
But new science breaks old paradigms. This October, 29 years after Shechtman’s discovery, the Royal Swedish
Academy of Sciences awarded him the Nobel Prize in Chemistry for 2011.
Robert Prechter featured Shechtman’s research in The Wave Principle of Human Social Behavior (1999), when
he wrote about how these newly identified objects are based on the Golden Ratio:
[Daniel Shechtman] discovered a type of crystal that contains spiral arrangements and is governed by Fibonacci
mathematics. Initially believed impossible, the quasi-crystal has been verified by photographs made with an electron
microscope. The quasi-crystal exhibits ‘five-fold symmetry,’ which means that a single rotation of the crystal exposed
to an X-ray produces a symmetrical scattering pattern five times (p. 428).

This characteristic of fiveness is found in the Wave Principle along with fractality, a relationship to the Fibonacci
sequence of numbers, and robust self-similarity. And, similar characteristics were discovered in a 1993 study of
DLA clusters by Alain Arneodo and four other scientists from the Centre de Recherche Paul Pascal and the École
Normale Supérieure in France.
The study, like others, shows a greater level of order in apparently random processes than was previously ex-
pected. Prechter was interested in this new research because the Wave Principle proposes the same conclusion in
relation to human social behavior.

12
 The Socionomist—Highlights from the First Three Years

Another important aspect of quasicrystals involves
their mosaics, which are known as Penrose tiling. Pre-
viously, the consensus view was that all solid matter
reflected only two patterns: completely random (glass)
or perfectly ordered (periodic). Penrose tiling falls in
between. In 1984, physicist Paul Steinhardt and graduate
student Don Levine used computer-generated images to
see what diffraction pattern Penrose tiling would reflect
in a real atom. It produced a diffraction pattern in the
middle of the two accepted outcomes.
Prechter discussed the mathematical similarities of
Penrose tiles to the Elliott wave model of social-mood
change:
It turns out that both the areas of the tiles and therefore
the numbers of the tiles in any given (large) area, are in
Fibonacci proportion, the same proportion that governs
both the numbers and sizes of motive vs. corrective El-
liott waves. … Penrose’s tiles support the applicability
of the Fibonacci sequence to processes of structured
yet infinitely variable partitioning and its inverse,
structured yet infinitely variable building (p. 432).
Shechtman’s story brings to mind the walls of
skepticism other innovators have faced. Daniel Kahne-
man, who along with Vernon Smith was a pioneer of
behavioral economics, recalls how some of his work
was received: “We were also accused of spreading a
tendentious and misleading message that exaggerated
the flaws of human cognition.”
Prechter, however, recognized the seminal impor-
tance of a market simulation that Smith conducted:
While these experiments were conducted as if par-
ticipants could actually possess true knowledge of
coming events and so-called fundamental value, no
such knowledge is available in the real world. The fact
that participants create a boom-bust pattern anyway is
overwhelming evidence of the power of the herding
impulse (pp. 153-154).
Three years later, Smith and Kahneman were
awarded a Nobel Memorial Prize in Economic Sci-
ences.
History offers many instances of individuals who
challenged conventional beliefs, and in turn were labeled
heretics, ostracized, ridiculed and more often just plain
ignored. This hostile response is not a thing of the distant
past, but an ever-present deterrent to innovation. We ap-
plaud Daniel Shechtman for his discovery, and for the
courage to challenge textbook orthodoxy in establishing
a new perspective.

This excerpt is so unique that it almost defies description—unless you’re Bob Prechter describing his own work in
this July 2010 Special Report of The Socionomist.

And Now for Something Completely Different

For many years I have had requests from subscribers to expand upon the Popular Culture and the Stock Market
report of 1985. I have had the enclosed project in mind for some time, and now seems a good time to issue it.... So,
I am taking this opportunity to present a socionomic study showing, with an in-depth example, how social mood
regulates the fortunes of public personas such as politicians, sports figures and pop stars. You won’t find this type
of insight anywhere else.

Social Mood Regulates the Popularity of Stars

Case in point: The Beatles
By Robert Prechter

September 21, 1964: Reporter: “Can you explain why these kids do it?”
Ringo: “No. Every day, we’ve been asked that, and we still don’t know why.”
Reporter: “Do you think you’d have to be a sociologist, a psychologist, of the times?”
“Why the mayhem started, and why it was necessary to those causing it, will forever remain a mystery, defying social
psychologists and historians then as now.”

13
 The Socionomist—Highlights from the First Three Years
A sociologist, of the times or not, cannot shed much
light on the appearance and disappearance of the mass
adoration of certain people, much less of the changes
from adoration to vilification and (sometimes) back
again. But a socionomist can.
The extreme popularity and unpopularity that some
people achieve in society is regulated by social mood.
Social mood trends have outlets of expression, and one
of them is the creation of, and then the adoration and/
or vilification of, public figures. When the public finds
individuals or ensembles (such as sports teams or musi-
cal groups) upon whom they can project their positive or
negative feelings, those people become public figures.
The public does not choose such individuals en-
tirely by chance. They have characteristics that allow
people to project their feelings onto them. People who
become popular representatives of positive social mood
might be intelligent, lovable, talented, clever, funny,
urbane, handsome, beautiful or sexually attractive,
or have several of these traits. People who become
popular representatives of negative social mood might
be intelligent, provocative, driven, rebellious, daring,
harsh, arrogant, melancholy, comforting or vulnerable.
Fame rarely lights on just anyone. At the same time,
however, millions of people share such traits, and they
do not become famous. The combination of ambition,
circumstance and the trends of social mood work to
place certain people in the public eye. Exertion alone
cannot do it; many people try and fail to become famous.
Circumstance alone is rarely enough; talent and effort
must be part of the package. But once these factors
combine for a person at the right time with the trend of
social mood, he or she can achieve fame. Thereafter,
such people’s popularity is strongly, if not exclusively,
buffeted by social mood.
One can link the fortunes of dozens of stars to social
mood trends. Whether the individual is Carol Burnett,
Bill Clinton, Perry Como, Bill Cosby, Miley Cyrus, John
Edwards, Herbert Hoover, Michael Jackson, Michael
Jordan, Marilyn Monroe, Richard Nixon, Elvis Presley,
Ronald Reagan, Franklin Roosevelt, Shakespeare, Frank
Sinatra, Britney Spears, John Travolta, John Wayne or
any other such public personality, one can observe the
waves of social mood shaping stars’ periods of suc-
cess and failure. The ultimate star-maker is the public,
and how the public feels determines how it views, and
treats, its stars.
14
There are bull market stars and bear market stars.
Bull market stars tend to be more revered, because posi-
tive mood encourages more loyalty than does negative
mood. Almost no person or ensemble is consistently
popular through a bull and bear market. Social mood
regulates people’s choice of media heroes, and when
mood changes, so does the focus of adoration or vili-
fication.
On rare occasion, an object of acclaim can succeed
in both positive and negative social-mood environments,
but some change in social mood usually ushers in the
popularity. Rodney Dangerfield, for example, toiled in
obscurity for many years until his sad-sack, “I don’t get
no respect” routine caught on in the bear market of the
late 1960s to the early 1980s. Yet by skewing his image
to that of a lovable guy, he stayed popular through the
1980s bull market. Most comedians, in contrast, clearly
represent bull markets or bear markets. Bill Cosby was
riding high in the bull market decades of the 1960s,
when he recorded popular comedy albums and starred
in two TV shows, and again in the 1980s, when his Bill
Cosby Show was the highest ranking sitcom of all time.
Richard Pryor, on the other hand, was a bear-market
comedian, who was popular throughout the 1970s until
the end of the 16-year bear market in the constant-dollar
Dow in 1982, the year he won the last of his five Gram-
mys. The vast majority of public figures are either “bull
market” or “bear market” heroes, as they represent
society’s positive or negative feelings.
The rarest of stars have a feel for public mood and
know when to press their cases. It is said that after Na-
poleon’s initial period of success had ended, a rabid fan
approached him and demanded that he return to promi-
nence and lead France again; Napoleon replied, “While
my star is rising, nothing can stop me; while my star
is falling, nothing can save me.” When reporters asked
Jerry Seinfeld why he announced retirement when his
show was so popular, he simply said, “[I] want to go out
on top. It’s time.” Most stars overstay their welcomes,
and when the trend of social mood shifts, they become
has-beens. Others achieve relatively unstained immor-
tality by conveniently (for their legacy, at least) dying
near their peaks in popularity, as did John Kennedy,
Marilyn Monroe, Jimi Hendrix and Cleopatra.
In 1985, “Popular Culture and the Stock Market”
(reprinted in Pioneering Studies in Socionomics), first
proposed the socionomic regulation of famous people’s
 The Socionomist—Highlights from the First Three Years
public experience. To illustrate this idea in detail, I can
choose few better examples than the most popular band
of the past half-century. Many people living today have
a relationship with the Beatles. Such readers will be able
to hear and feel—as opposed to simply read about—the
band’s story and its connection to social mood....
Ambition and Effort
The Beatles were ambitious and aimed high. They
repeatedly stated out loud to themselves their ultimate
goal: to reach “the toppermost of the poppermost.”
During the early years of frustrated goals, the Beatles’
single-mindedness was a key ingredient in letting their
talent develop and producing the ultimate result.
The Beatles also put in the effort. Norman Chap-
man, the Beatles’ drummer for a few gigs in 1960, later
recalled, “Everything they did and said was directed at
making their sound better and better, day by day.” Sam
Leach, Liverpool music promoter, wrote, “The Beatles
kept up a blistering pace… John and Paul pushed each
other to the limit.” Alf Bicknell, their driver from 1964
to 1966, wrote in his diary, “They never stop those
two. ...there was always something to do and I could
not actually say that I had a full free day.” Epstein’s
personal assistant Tony Bramwell said, “I don’t think
anyone worked as hard as the Beatles. They hardly ever
had time off, hardly ever had a holiday….” Obsessive
focus and hard work built the foundation upon which
they could fulfill a role as icons of their age.
Circumstance
Circumstance was the second important factor in
the mix. In November 1960, England terminated its
program of two years of National Service in the military.
15
“Given their age difference[s], the Beatles could never
have existed had National Service been maintained.”
Or consider: Had the Beatles been as few as five years
older when they met in 1957-1958, they surely would
have given up on careers as pop stars before 1963 ar-
rived. Many musicians and singers, trying to repeat
Elvis Presley’s experience, followed just such a path
to oblivion....
Some important circumstances were of a personal
nature. To a man, the Beatles disdained traditional be-
havior; every member of the pre-Beatles incarnation of
the band—the Quarry Men—who quit or were dismissed
wanted normal lives. But the Beatles—even Paul, who
had top grades and a bright academic future— quit
school to play music, without a clue as to where such
rash decisions would lead them. The group’s democratic
choice of a collective name, rather than one featuring a
leader (“X and the So-and-So’s,” a construction popular
at the time), would allow fans to identify with any one
of them, paving the way for their broad appeal. Their
wit, honesty, self-assurance and engaging personalities
are well known and documented, and without them
they could not have won over Brian Epstein (who noted
“their personal charm”), George Martin (who found
their intelligence and laconic humor sufficient reason
to work with them) and the worldwide press (to whom
the Beatles always gave honest or humorous responses
to questions instead of show-biz clichés). The Beatles
had a cocky stubbornness in insisting upon writing their
own singles, and once they began, they “definitely had
an eternal curiosity for doing something different.”
Other important circumstances were their compatibility
and closeness. Paul: “We work well together. That’s the
truth of it. It’s a very special thing.”
 The Socionomist—Highlights from the First Three Years

The truism that "Language Matters" goes beyond what people do or do not say. It also applies to how often people
use certain words and phrases -- including the people at FEMA, aka the U.S. Federal Emergency Management
Agency. And when it comes to the phrase "federal family," FEMA's frequency of use is "language" that "matters"
indeed. Excerpted from the January 2012 Socionomist.

Paternalism in Washington:
One Big, Happy Federal Family?
By Alan Hall

... Ancient Greek political philosophers presented the state as a larger model of the family, implying that citizens
are the children who have needs and leaders the parents who know best how to meet them. Ever since, the rules of
many monarchs, aristocrats and dictators have been characterized by paternalism, which now appears to be increas-
ing in America.
FEMA’s uses of “federal family” [surged] during the 2000-2003 negative trend in social mood. Uses then fell to
near zero as social mood turned positive from 2003-2007, even as FEMA’s activities and profile soared during the
August 2005 Hurricane Katrina disaster. “Federal family” usage then surged as society’s mood became increasingly
negative again after 2008, in concert with plunges in U.S. consumer confidence and stocks valued in gold, and spikes
in food stamps and the poverty rate.
During the Great Depression, President Franklin Roosevelt employed a paternalistic tone in his famous Fireside
Chats. For example,
This recession has not returned us to the disasters and suffering f the beginning of 1933. Your money in the bank is
o

safe; farmers are no longer in deep distress and have greater purchasing power; dangers of security speculation have
been minimized; national income is almost 50% higher than it was in 1932; and government has an established and
accepted responsibility for relief. … I know that many of you have lost your jobs or have seen your friends or members
of your families lose their jobs. … I conceive the first duty of government is to protect the economic welfare of all
the people in all sections and in all groups. … I am constantly thinking of all our people—unemployed and employed
alike—of their human problems of food and clothing and homes and education and health and old age. You and I
agree that security is our greatest need. I am determined to do all in my power to help you attain that security… .
—April 14, 1938

Today, according to the FEMA site:

• “President Obama has asked that we continue to lean forward as a team…a team that includes our cities,
states and the federal family….”
• “We’re part of Department of Homeland Security, we’re part of the Federal family, we’re part of a partnership….
• “On behalf of the entire federal family, our hearts go out to those who lost their loved ones….”
• “The federal family is dedicated to staying for as long as it takes to help them recover….”

Paternalism as Authoritarianism
In his August 2004 article, “Statist Quo Bias,” Daniel B. Klein included the definition of paternalism from The
Blackwell Encyclopaedia of Political Thought: “In modern use the term usually refers to those laws and public poli-
cies which restrict the freedom of persons in order that their interests may be better served” (Italics added by Klein).
Ulysses Everett McGill—the dapper character played by George Clooney in the movie O Brother, Where Art
Thou?—understood this definition. McGill told his ex-wife: “I’ll tell you what I am—I’m the damn paterfamilias!
You can’t marry him!”
... Depression will make Uncle Sam incapable of keeping his many promises. More people will then perceive the
nature of his paterfamilias strategy to be, essentially, authoritarian, meaning society will likely polarize further over
its choice of leaders. This will provide additional fodder for the authoritarian/anti-authoritarian battles we already
see under way.

16
 The Socionomist—Highlights from the First Three Years

This excerpt includes the final paragraphs of a follow-up article to our February 2011 education study. The complete
follow-up article indentified no fewer than six outcomes the earlier article had forecast—read about one of those
below, plus an outcome that even we didn't see as part of the trend. Excerpted from the March 2012 Socionomist.

The Education Industry Is Traversing a Broad,

Multi-Decade Social Mood Peak
By Alan Hall

Tuition Prices Are Still Going Up—for Now

What We Said:
Our February 2011 issue showed a three-century, rising Elliott wave in tuition prices. The pattern appears to be
complete, which means that a major decline is due.
What Has Happened Since:
Several universities cut tuition and fees in 2011.31 But according to USA Today, overall tuition prices rose
eight percent at public colleges in 2011. At the same time, 41 states cut their spending on public higher education.
The result? Students and their families must cough up even more cash. The president of the American Council on
Education said, “It has become all too common for state legislatures to dip into the pockets of students and families
to balance state budgets.”

All of which means that the higher education tuition bubble remains, for the moment, un-popped. On March
12, an Atlanta Journal Constitution article, “College Students Majoring in Debt,” reported, for example, that The
University of Georgia’s spending “on deans and vice presidents … jumped by more than a third” throughout the
recession and 2011.
The article says, “The economy may be in a downturn, but the state’s colleges are on an upswing, and students
are paying for much of it.” Such complacency on the part of universities is likely to persist until social mood shifts
to negative at all degrees of trend.
But change is in the air. In March 2012, tuition hikes sparked protests in California. And, according to Elliott
Wave International, social mood is nearing a large-degree positive extreme within a larger-degree negative trend.
Once this peak is passed, we expect that universities will be in for a real crisis in enrollments, and by extension tuition
receipts, shortly thereafter. Once that occurs, look for colleges to dramatically cut costs—as a matter of survival.

Here Is One Development We Did Not See Coming: The College Sugar Daddy
Socionomics can anticipate the tendency of the social system and sometimes nail specific predictions. But it
cannot foresee every expression of society’s mood. For example, we never contemplated this possibility:

“Sugar daddies: The new way to pay off college loans?”

That was the headline on an August 2011 story in The Week. The article reported that websites such as “Seek-
ingArrangement.com, SeekingTuition.com, and SugarDaddyMeet.com allow young, mostly female students to post
‘sugar baby’ profiles and hook up with a ‘sugar daddy.’” The founder of SeekingArrangement said he’s seen “a 350
percent jump in verified college-going ‘sugar babies’ since 2007, and he now actively advertises his site as a way to
pay off student loans.” The Pulitzer Prize winning newspaper The Oregonian reported on March 12 that the respected
20-year editor of its editorial pages died at age 63 of cardiac arrest following a sex act with a 23-year-old college
student. The woman told deputies that he had been giving her money for textbooks and other school expenses in
exchange for sex.
If EWI’s outlook for the looming negative mood is correct, the truly radical changes for the educational system
still lie ahead. So far, social actions support that outlook.

17
 The Socionomist—Highlights from the First Three Years

The Socionomist is designed to help readers understand and anticipate waves of social mood. We also present the latest essays
in the field of socionomics, the study of social mood; we anticipate that many of the hypotheses will be subjected to scientific
testing in future scholarly studies.
The Socionomist is published by the Socionomics Institute, Robert R. Prechter, Jr., president. Alan Hall, Ben Hall, Matt Lampert
and Euan Wilson contribute to The Socionomist. Chuck Thompson, editor. Mark Almand, executive editor.
We are always interested in guest submissions. Please email manuscripts and proposals to Chuck Thompson via
institute@socionomics.net. Mailing address: P.O. Box 1618, Gainesville, Georgia, 30503, U.S.A. Phone: 770-536-0309.
All contents copyright © 2012 Socionomics Institute. All rights reserved. Feel free to quote, cite or review, giving full credit. Typos
and other such errors may be corrected after initial posting.
For subscription matters, contact Customer Service: Call 770-536-0309 (internationally) or 800-336-1618 (within the U.S.).
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For our latest offerings: Visit our website, www.socionomics.net, listing BOOKS, DVDs and more.
Correspondence is welcome, but volume of mail often precludes a reply. Whether it is a general inquiry, socionomics commentary or a research idea, you
can email us at institute@socionomics.net.
Most economists, historians and sociologists presume that events determine society’s mood. But socionomics hypothesizes the opposite: that social mood
determines the character of social events. The events of history—such as investment booms and busts, political events, macroeconomic trends and even peace
and war—are the products of a naturally occurring pattern of social-mood fluctuation. Such events, therefore, are not randomly distributed, as is commonly
believed, but are in fact probabilistically predictable. Socionomics also posits that the stock market is the best available meter of a society’s aggregate mood,
that news is irrelevant to social mood, and that financial and economic decision-making are fundamentally different in that financial decisions are motivated
by the herding impulse while economic choices are guided by supply and demand. For more information about socionomic theory, see (1) the text, The Wave
Principle of Human Social Behavior © 2011, by Robert Prechter; (2) the introductory documentary History’s Hidden Engine; (3) the video Toward a New
Science of Social Prediction, Prechter’s 2004 speech before the London School of Economics in which he presents evidence to support his socionomic hy-
pothesis; and (4) the Socionomics Institute’s website, www.socionomics.net. At no time will the Socionomics Institute make specific recommendations about
a course of action for any specific person, and at no time may a reader, caller or viewer be justified in inferring that any such advice is intended.