Classical economics presupposes that we’re all rational, individualistic entities, making economic choices that maximally benefit us; homo economicus.
But you don’t have to look far to see examples of people acting, economically and otherwise, in ways that certainly don’t seem rational.
There are all sorts of ways to get out of this apparent contradiction. One is microeconomics: unearthing the systems of economic motivation that reward or punish the decisions of individuals. Another is by adapting the concept of economic utility, expanding it to include irrational, but strongly felt drivers of human behaviour.
One of the most influential is mimetic theory. Mimetic theory deals with how things become desirable to us. For instance, the difference between a low-end sneaker costing around $30 or $40 and a high-end sneaker costing $100 or $200 isn’t that great.The difference is that, it is probably only going to affect high-end athletes. If you’re an ordinary 14-year-old, there’s really no functional difference. But maybe you remember how different they felt to you, when you were that age. (If it wasn’t sneakers, substitute whatever your schoolmates fixated on.)
Why did you, and I, and everyone else, desire these elite-athlete sneakers? Economically, it seems irrational; we could have spent the money on something else. And most of us weren’t that interested in basketball. So where did this desire arise?
Mimetic theory tells us something about this. It says certain objects (as in, objects of desire; they can be people or attributes, not just physical objects) become attractive to us as a result of attractiveness signals given by others. We’re made to feel that Nike Air Jordans are worth queueing up for and paying up for because others around us feel the same way.
One important thing to understand about mimetic desire is that it’s not static; we aren’t told by signals from others, ‘desire this,’ and then we desire it until we attain it. Instead, we’re enmeshed in a network of feedback about desirability in which we also participate, sharing signals with others about, and helping to define a group concept of, desirability.
We rely on models and mediators that tell us what to desire, how to appropriately express that desire, and what that says about us and the groups we belong to. In many ways mimetic theory is more a social than an economic idea.
Yet, mimetic theory’s apparent suggestion of unanimity is undercut because our models rapidly become our rivals for items we have both taught each other to agree are valuable. Thus, mimetic theory can go some way to explaining why we seem to be able to create a struggle for scarce resources, even when actual resources are not scarce.
René Girard and novel desires
Mimetic theory is the brainchild of Rene Girard, who generated the concept out of the study of literature, particularly Cervantes, Shakespeare, Dostoevsky, Proust and Stendhal. After establishing a scholarly reputation as an expert on the European novel, he turned his attention to the underlying causes of conflict and wasn’t intentionally studying economics at all, though his ideas have profound implications for the field. He proposed a theory with four main sequential components: mimetic desire, scapegoating, and cover-up/revelation.
Let’s start with desire.
We’ve discussed this, but only in a general way. Let’s get under the hood and look at what Girard meant by the term. Mimetic desire operates as a subconscious imitation of someone else’s desire, which we actively participate in without being consciously aware of it. Because it consists of a desire to occupy the same role, or to “be the same person”, it explains the roots of envy and rivalry as well as of friendship.
Mimetic rivalry occurs when people switch positions in a mimetic hierarchy — as when one musician’s work starts to outsell another’s, whom both had previously thought to fulfill a mentor role, or when one academic begins to outperform another and moves from being imitator to model. It can also take the form of a very large number of people, all agreeing on the absolute desirability of a very scarce resource.
Consider the large number of very enthusiastic Beatles fans in the early 1960s. Some concerts drew tens of thousands, mostly girls a few years younger than the Beatles and all convinced that the Beatles were eminently desirable. Yet, only four of them could possibly have got together with one.
Where there is no realistic chance of gaining the objective, mimetic rivalry doesn’t arise and mimetic desire functions as in-group bonding. But where some gain the objective and others don’t the rivalry can become serious and painful.
Another, related issue is the mimetic trap. Here, individuals become enmeshed in a memetic group which accounts for the majority of their desires, struggling sometimes for years to obtain more and more specialized goals, highly prized by their own mimetic group; as this process continues, it can become more and more difficult to move out of that mimetic group and into another one. This is part of what happens with professional specialization, of course; but it is also how cults form.
Scapegoating comes from an ancient traditional practice in which the sins of a community would be symbolically laid on an animal which would then be sacrificed or driven away. It’s easy to see how this process is still sometimes acted out, which is why we still have the term in common usage; but to Girard, scapegoating is one of the fundamental elements of any human society.
Girard points out that scapegoating is a way to sublimate mimetic conflict: a way to make a mythic result that lets societies keep the most prosocial aspects and deal with the worst of the rivalry that mimetic desire generates. In Girard’s words, “there is not prohibition which cannot be related to mimetic conflict.” In his thought, neither is there social ritual that does not have the same relation.
In particular, as rivalry becomes more acute, it becomes invested with the need to maintain prestige, avenge past wrongs and establish dominance — we wind up fighting, not to win the initial object of mimetic desire, but just to win; and in the worst cases, just because we’re fighting. (Hence feuds.) To avoid this spiral, which is hard to pull out of, mimetic scapegoating involves identifying an outside influence which has malignly caused the conflict and attacking that influence. If this is not done, one of the rivals is often scapegoated instead, and in myth and legend the rival is often the twin of the protagonist — Romulus and Remus, legendary founders of Rome, conform to this mythos, as do Cain and Abel.
For the mimetic system to work properly, the community must do two things: expel or murder its scapegoat, and conceal from itself the nature of its crime. The scapegoat is always the innocent vessel of the community’s rejection and the violence of its unresolved mimetic conflicts. But the scapegoating doesn’t work if the community sees and accepts that its own violence is to blame for the death of the scapegoat.
Girard goes further here, creating a new interpretation of the Bible that he thinks shows that Christianity is unique among world religions because it lifts the cover off the scapegoating process and opposes scapegoating people considered “other” — including the obvious figure of Christ himself whose story is a scapegoating story, but seen from the outside.
What does all this have to do with digital assets?
Girard’s ideas are fascinating, but what do they have to do with digital assets? They go some way to explaining the very rapid swings in price of an asset like BTC; multiple cultures, each with its own mimetic engines running, are in play around BTC, for instance. There’s mainstream investors, slowly becoming convinced; hardcore early adopters who are happy to advise each other to “HODL” (hold) BTC even during dips; canny digital asset investment pros, often close to the industry in other ways, advising one another to buy the dip. Within each group mimetic desires and rivalries will play out.
One of the clearest examples of this process is Elon Musk’s recent commentary on BTC. Musk, famously outspoken, blew hot and cold on Bitcoin, tweeting first in favour of the currency and then suggesting that he was “breaking up” with it. Prices tracked with his comments.
Yet, Musk has no direct power to affect Bitcoin prices. Instead, he functioned as a mimetic model for people who wanted to achieve an entrepreneurial, high-technology lifestyle through methods he recommended. True to mimetic theory, Musk was pilloried after his tweets, accused of manipulating the market and of “ruining lives”.
That is one example; another is the mimetic desire and rivalry shared by creators of the major blockchains, who themselves form a tight-knit community. Vitalik Buterin was an early Bitcoin developer, but became disappointed with it and co-founded Ethereum with Gavin Wood — who developed Solidity and the Ethereum Virtual Machine before he became disappointed with Ethereum and went on to Kusama and Polkadot.
The core of the blockchain, especially the ambitious general-purpose blockchain projects on which other projects run, is created by a relatively small number of people. High-minded, idealistic, extremely technically competent and educated, these people’s aims are similar, and increasingly so are their methods. Polkadot, Kusama and Ethereum are even interoperable: one big mimetic community, with the obvious potential for rivalries baked right in.