“Ideas Matter” is the slogan of the Boston Review. This is a controversial claim in the social sciences. (Disclosure: I write a column for BR; I wear a tee-shirt of theirs that says “Ideas Matter.”) Do ideas really matter? How much do they shape individual behavior or society compared to material circumstances such as economic incentives, physical constraints, and military force?
Arguments about how much ideas matter have addressed broad historical issues, such as explaining the economic rise of the West – was it the “Protestant Ethic” (Max Weber), or the West’s geographical advantages (Jared Diamond)? – and differences between Asian and European societies – are they about Confucianism vs Greek thought, collectivism vs individualism, the timing of industrialization, or something else? Arguments over individual differences in behavior similarly polarize around the issue of whether they are to be explained by what people think or by people’s circumstances, as in the debates over the “culture of poverty.” Ideas matter, across these sorts of debates, to the extent to which they shape how people understand the world, value their options, and are guided by social norms.
This post however, is about a different way that ideas can matter: by re-shaping the “reality” to match the idea. Ideas can become, in the phrase developed by the great sociologist Robert K. Merton “self-fulfilling prophecies.” Ideas about the world, although initially false, can become true – and consequential – because people believe them to be true. Consider a few examples from psychology and economics.
Mental Matters
One example is the history of psychological syndromes. Over the last couple of centuries practitioners have identified conditions such as melancholia, neurasthenia, nostalgia, and hyperactivity. Some conditions have had their heydays and largely disappeared (see earlier posts here and here, and this collection). But their description and codification almost certainly led to more doctors diagnosing and more patients experiencing those syndromes. Doctors are prompted to “see” more cases and patients are prompted to identify with and enact the diagnoses. If one has the “vapors,” one reacts in certain ways. The idea that a certain condition exists can brings itself into being or, at least, into greater prominence.
In a long series of studies, psychologist Carol Dweck and her colleagues (e.g., here and here) have described another and pervasive self-fulfilling prophecy. People who believe that individuals’ skills are fixed – e.g., “I’m just not a ‘math person’” – tend to flounder on those skills. If you don’t think there is anything you can do that would improve your skills, you don’t do anything and the prophecy comes true. Conversely, people who believe that skills are improvable tend to improve them.
Money Matters
The self-fulfilling prophecy also arises in with regard to economic theories. Although these ideas are meant to describe how the world works, those descriptions themselves can make the world work that way. Fabrizio Ferraro, Jeffrey Pfeffer, and Robert I. Sutton, in a 2005 paper, provide a broad analysis. They cite a study that provides a quite specific example: Over time, trading on the Chicago Board Options Exchange came to closely fit the expectations of an economic model of trading, even though that model had initially predicted prices only crudely. Traders believed the model to be true and started behaving in accord with its implications. The result: the model became extremely accurate.
Wendy Espeland and Michael Saunder provide a related example in their study of law schools. Law school ratings systems, notably that of US News & World Report, assume that certain numbers, such as the average LSAT score of entering students, are good indicators of school quality. Whether the numbers really were, to start, good indicators of quality or not, the pressure on law schools from donors, students, faculty, and others to move up in the rankings led law school administrators to change policies in order to raise their scores. Eventually, the most effective law schools got the best numbers by, say, strictly screening out students with low LSAT scores, and the rating systems’ theories of quality became (more) true.
Economic models, especially in our current political environment, are very influential – at least, the American versions of economic models are. Such models purport to describe what “rational actors” do. Actors who consider themselves “rational” – banks, finance ministries, investment funds, and the like – reasonably fall in line, reinforcing the “truth” of the model. 
At the level of individuals, this can be disconcerting for economists, too. For years, most studies have shown that economics students tend to be more self-interested than students in other fields. Some of this correlation between training and behavior is selection – different sorts of students choose different sorts of majors. But it appears that economics education itself probably contributes to especially valuing “looking out for No. 1.” Moreover, acting that way then confirms that world view as sensible. Researchers in the experimental gaming literature (e.g., here) long ago found that people who are competitive assume that others are, too, and act accordingly, one result being that other people, ones who initially wanted to cooperate, are pressed into being competitive themselves. Then, the originally competitive types have their theory of human nature confirmed; that theory becomes a bit truer.
One might say that ideas can matter in part because they change matter, because believing in them changes the realities for the individuals who believe them and often the realities for others as well.
MADE IN AMERICA 
