Rhetoric, Risk, and Markets: The Dot-Com Bubble

Post-conventional economic theories are assembled to inquire into the contingent, mimetic, symbolic, and material spirals unfolding the dot-com bubble, 1992–2002. The new technologies bubble is reconstructed as a rhetorical movement across the practices of the hybrid market-industry risk culture of communications. The legacies of the bubble task economic criticism with developing critical capacity sufficient to address attention-driven economies of worth. Keywords: MimesisBubblesRhetoric of EconomicsAttention EconomyEconomic Criticism Acknowledgements G. Thomas Goodnight wishes to thank the Obermann Center for Advanced Studies, University of Iowa, and the Huntington Library for support. Sandy Green wishes to thank the University of Southern California Center for Interdisciplinary Research for support. Notes 1. Charles Mackay, Extraordinary Popular Delusions and the Madness of Crowds (1841; New York: John Wiley & Sons, 1996), 118. 2. Mackay, Extraordinary Popular Delusions, 119–20. 3. Anna Goldgar, "Flower Power: Tulipmania: An Overblown Crisis?" History Today 57 (2007): 35. 4. Peter M. Garber, "Famous First Bubbles," Journal of Economic Perspectives 4 (1990): 36. 5. Jeremy J. Siegel, "What Is an Asset Price Bubble? An Operational Definition," European Financial Mangement 9 (2003): 12. 6. Francois Trahan, Kurt Walters, and Caroline Portny, "Asset Bubbles: A Look at Past and Future Manias," Bear Stearns Equity Research Investment Strategy Report (2005), 15. 7. Trahan, Walters, and Portny, "Asset Bubbles," 15; Greg Ip, "Year-End Review of Markets & Finance 2000," Wall Street Journal, January 2, 2001. 8. Eli Ofek and Matthew Richardson, "DotCom Mania: The Rise and Fall of Internet Stock Prices," Journal of Finance 58 (2003): 1113. 9. A rhetorical movement is "the migration of an argument or appeal from the controversy that originally contained it to quite different circumstances or events." David Zarefsky, "Preface," in Rhetorical Movement: Essays in Honor of Leland M. Griffin, ed. David Zarefsky (Evanston, IL: Northwestern University Press, 1993), viii. A rhetorical movement may entangle state-private measures for change. David Zarefsky, "President Johnson's War on Poverty: The Rhetoric of Three 'Establishment' Movements," Communication Monographs 44 (1977): 352–73. Most generally, a "trajectory" embodies a "qualitative progression." Leland M Griffin, "When Dreams Collide: Rhetorical Trajectories in the Assassination of President Kennedy," Quarterly Journal of Speech 70 (1984): 126. 10. Deirdre N. McCloskey, The Rhetoric of Economics (Madison: University of Wisconsin Press, 1985), 69; Deirdre N. McCloskey, Knowledge and Persuasion in Economics (Cambridge: Cambridge University Press, 1994), 82. 11. Mitchel Y. Abolafia and Martin Kilduff, "Enacting Market Crisis: The Social Construction of a Speculative Bubble," Administrative Science Quarterly 33 (1988): 177. 12. Paul Ricoeur, Time and Narrative, vol. 1, trans. Kathleen McLaughlin and David Pellauer (Chicago: University of Chicago Press, 1984), 71–72. 13. Gary Stix, "The Science of Bubbles and Busts," Scientific American, July 2009, 80. 14. Thomas Schuster, The Markets and the Media: Business News and Stock Market Movements (Lanham, MD: Lexington Books, 2006), 68. 15. Lawrence H. Summers, "Does the Stock Market Rationally Reflect Fundamental Values?" Journal of Finance 41 (1986): 591; Burton G. Malkiel, "The Efficient Market Hypothesis and Its Critics," Journal of Economic Perspectives 17 (2003): 59. 16. Eugene F. Fama, "The Behavior of Stock-Market Prices," Journal of Business 38 (1965): 90, 94. 17. Lawrence Grossberg, "On Postmodernism and Articulation: An Interview with Stuart Hall," Journal of Communication Inquiry 10 (1986): 53. 18. Paul J. DiMaggio and Walter W. Powell, "The Iron Cage Revisited: Institutional Isomorphism and Collective Rationality in Organizational Fields," American Sociological Review 48 (1983): 147–60. 19. Douglass C. North, "Economic Performance through Time," American Economic Review 84 (1994): 359–68; Neil Fligstein, "Markets as Politics: A Political-Cultural Approach to Market Institutions," American Sociological Review 61 (1996): 658. 20. Heather A. Haveman, "The Future of Organizational Sociology: Forging Ties among Paradigms," Contemporary Sociology 29 (2000): 478; Lynne G. Zucker, "The Role of Institutionalization in Cultural Persistence," American Sociological Review 42 (1977): 726–43. 21. DiMaggio and Powell, "Iron Cage Revisited," 154. 22. Roger Friedland and Robert R. Alford, "Bringing Society Back In: Symbols, Practices, and Institutional Contradictions," in The New Institutionalism in Organizational Analysis, ed. Walter W. Powell and Paul J. DiMaggio (Chicago: University of Chicago Press, 1991), 234. 23. Jonathan R. T. Hughes, "Entrepreneurship," in Encyclopedia of American Economic History: Studies of the Principal Movements and Ideas, vol. 1, ed. Glen Porter (New York: Charles Scribner's Sons, 1980), 216. 24. Michel Callon and Fabian Muniesa, "Economic Markets as Calculative Collective Devices," Organizational Studies 26 (2005): 1229–50. 25. Edward J. Zajac and James D. Westphal, "The Social Construction of Market Value: Institutionalization and Learning Perspectives on Stock Market Reactions," American Sociological Review 69 (2004), 450–51. 26. Roy Suddaby and Royston Greenwood, "Rhetorical Strategies of Legitimacy," Administrative Sciences Quarterly 50 (2005): 36. 27. Hayagreeva Rao, Henrich Greve, and Gerald F. Davis, "Fool's Gold: Social Proof in the Initiation and Abandonment of Coverage by Wall Street Analysts," Administrative Science Quarterly 46 (2001): 503. 28. Daniel Beunza and Raghu Garud, "Calculators, Lemmings or Frame-Makers? The Intermediary Role of Securities Analysts," Sociological Review 55 (2007): 13–39. 29. Harrison C. White, "Where Do Markets Come From?" American Journal of Sociology 87 (1981): 518. 30. Robert J. Shiller, Stanley Fischer, and Benjamin M. Friedman, "Stock Prices and Social Dynamics," Brookings Papers on Economic Activity (1984): 464. 31. Since Freud, contagion theory has been a minor, contested research line in social psychology to explain the rapid spread of unusual beliefs. With networked communications, it moves to a central issue of influence in markets. See David A. Levy and Paul R. Nail, "Contagion: A Theoretical and Empirical Review and Reconceptualization," Genetic, Social, and General Psychology Monographs 119 (1993): 235–79; David Hirshleifer and Siew Hong Teoh, "Thought and Behavior Contagion in Capital Markets," in Handbook of Financial Markets: Dynamics and Evolution, ed. Thorsten Hens and Klaus Reiner Schenk-Hoppé (Boston: North-Holland, 2009), 1–56. 32. Dan Ariely, Predictably Irrational: The Hidden Forces that Shape Our Decisions (New York: HarperCollins, 2008); Richard H. Thaler, The Winner's Curse: Paradoxes and Anomalies of Economic Life (New York: Free Press, 1992). 33. Amos Tversky and Daniel Kahneman, "Rational Choice and the Framing of Decisions," Journal of Business 59 (1986): S255, S258. 34. Timothy G. Pollock, Violina P. Rindova, and Patrick G. Maggitti, "Market Watch: Information and Availability Cascades among the Media and Investors in the US IPO Market," Academy of Management Journal 51 (2008): 335–36, 338. 35. Graciela L. Kaminsky, Carmen M. Reinhart, and Carlos A. Vegh, "The Unholy Trinity of Financial Contagion," Journal of Economic Perspectives 17 (2003): 56. 36. I. W. Howerth, "The Great War and the Instinct of the Herd," International Journal of Ethics 29 (1919): 174–87; W. Trotter, Instincts of the Herd in Peace and War (New York: Macmillan Company, 1916); Thomas Lux, "Herd Behaviour, Bubbles and Crashes," Economic Journal 105 (1995): 881–96. See also Sigmund Freud, Civilization and Its Discontents, trans. James Strachey (New York: W. W. Norton, 1961). 37. Sushil Bikhchandani, David Hirshleifer, and Ivo Welch, "A Theory of Fads, Fashion, Custom, and Cultural Change as Informational Cascades," Journal of Political Economy 100 (1992): 992–1026. 38. Michael Callon, ed., The Laws of the Markets (Oxford: Blackwell, 1998), 30. 39. Donald MacKenzie and Yuval Millo, "Constructing a Market, Performing Theory: The Historical Sociology of a Financial Derivatives Exchange," American Journal of Sociology 109 (2003): 137. 40. George Soros, "The Theory of Reflexivity, Address April 26, 1994 to the MIT Department of Economics," World Economy Laboratory Conference (Washington, DC, 1994), http://www.sharpeinvesting.com/2007/08/george-soros-theory-of-reflexivity-mit-speech.html. Soros borrows from Robert K. Merton, Anthony Giddens, and Ulrich Beck. See Christopher G. A. Bryant, "George Soros's Theory of Reflexivity: A Comparison with the Theories of Giddens and Beck and a Consideration of Its Practical Value," Economy and Society 31 (2002): 112–13. 41. Benjamin Lee and Edward LiPuma, "Cultures of Circulation: The Imaginations of Modernity," Public Culture 14 (2002): 193, 195. 42. Michael Kaplan, "Iconomics: The Rhetoric of Speculation," Public Culture 15 (2003): 489. 43. Peter E. Earl, Ti-Ching Peng, and Jason Potts, "Decision-Rule Cascades and the Dynamics of Speculative Bubbles," Journal of Economic Psychology 28 (2007): 363. 44. Garber, "Famous First Bubbles," 53. 45. John Waggoner, "Commodity Bubble Brews? One Appears to Be Forming, but It's Not at Full Froth," USA Today, May 22, 2008. 46. Daniel Friedman and Ralph Abraham, "Bubbles and Crashes: Gradient Dynamics in Financial Markets," Journal of Economic Dynamics & Control 33 (2009): 936–37. 47. Elisabeth S. Clemens and James M. Cook, "Politics and Institutionalism: Explaining Durability and Change," Annual Review of Sociology 25 (1999); 441–66. 48. Mary Douglas and Douglas Wildavsky, Risk and Culture: An Essay on the Selection of Technological and Environmental Dangers (Berkeley: University of California Press, 1983), 8–9. 49. Thomas B. Farrell, "Practicing the Arts of Rhetoric: Tradition and Invention," Philosophy and Rhetoric 24 (1991): 183–212; Thomas B. Farrell, The Norms of Rhetorical Culture (New Haven, CT: Yale University Press, 1993), 62. 50. Luc Boltanski and Laurent Thévenot, On Justification: Economies of Worth, trans. Catherine Porter (Princeton, NJ: Princeton University Press, 2006), 194. 51. W. Tatarkiewicz, "Mimesis," in Dictionary of the History of Ideas, vol. 3, ed. Philip P. Wiener (New York: Charles Scribner's Sons, 1973), 226. 52. Xenophon, "Oeconomicus," in Xenophon: Memorabilia and Oeconomicus, trans. E. C. Marchant (London: William Heinemann, 1923), 381. 53. Rosario Assunto, "Mimesis," in Encyclopedia of World Art, vol. 10 (New York: McGraw-Hill Book Company, Inc., 1965), 95. 54. Plato, "The Sophist," in The Collected Dialogues of Plato, ed. Edith Hamilton and Huntington Cairns, trans. F. M. Cornford (Princeton, NJ: Princeton University Press, 1973), 957–1018; see also Plato, The Republic: The Collected Dialogues, trans. Paul Shorey, 575–844 (esp. books 2, 3, 10); Richard McKeon, "Literary Criticism and the Concept of Imitation in Antiquity," Modern Philology 34 (1936): 3–16, 17–19. 55. Stephen Halliwell, Aristotle's Poetics (Chapel Hill: University of North Carolina Press, 1986), 130. See Poetics, 1448a1, 1451b27, 1460b13. Greek mimetic theories and practices were taken up by Cicero into Roman rhetoric. Elaine Fantham, "Imitation and Evolution: The Discussion of Rhetorical Imitation in Cicero's De Oratore 2.87–97 and Some Related Problems of Ciceronian Theory," Classical Philology 73 (1978): 1–16. 56. Ekaterina V. Haskins, "'Mimesis' between Poetics and Rhetoric: Performance Culture and Civic Education in Plato, Isocrates, and Aristotle," Rhetoric Society Quarterly 30 (2000): 7–33. 57. Gabriel de Tarde, The Laws of Imitation, trans. Elsie Clews Parsons (1903; Gloucester, MA: Peter Smith, 1962), 144. 58. Elihu Katz, "Theorizing Diffusion: Tarde and Sorokin Revisited," Annals of the American Academy of Political and Social Science 566 (1999): 144–55. Tarde's idea of imitation eventually leads to Bruno Latour, Reassembling the Social: An Introduction to Actor-Network-Theory (Oxford: Oxford University Press, 2005), 14–16. 59. Upendra Baxi, "Acquisitive Mimesis in the Theories of Reflexive Globalization and the Politics of Human Rights," Chicago Humanities Institute, May 9–10, 1996, http://www.pdhre.org/dialogue/mimesis.html. 60. René Girard, "Interview: René Girard," Diacritics 8 (1978): 32–35. 61. René Girard, Deceit, Desire, and the Novel: Self and Other in Literary Structure, trans. Yvonne Freccero (Baltimore, MD: Johns Hopkins University Press, 1965), 99. 62. Walter Benjamin, "On the Mimetic Faculty," in Reflections: Essays, Aphorisms, Autobiographical Writings, trans. Edmund Jephcott, ed. Peter Demetz (1933; New York: Harcourt Brace Jovanovich, 1978), 336. 63. Gunter Gebauer and Christoph Wulf, Mimesis: Culture—Art—Society, trans. Don Reneau (Berkeley: University of California Press, 1992), 294. 64. Jean Baudrillard, Simulacra and Simulation, trans. Sheila Faria Glaser (Ann Arbor: University of Michigan Press, 1994). 65. Gebauer and Wulf, Mimesis, 7, 309. 66. Tatarkiewicz, "Mimesis," 228. 67. Quintilian, The Institutio Oratoria of Quintilian, vol. 4, trans. Harold Edgeworth Butler (1922; Charleston, SC: BiblioBazaar, LLC, 2009), 81. 68. Matthew Potolsky, Mimesis (London: Routledge, 2006), 2. 69. Beunza and Garud, "Calculators, Lemmings," 35. 70. Mitchel Y. Abolafia, Making Market: Opportunism and Restraint on Wall Street (Cambridge, MA: Harvard University Press, 2001), 84. 71. William J. Broad, "Clinton to Promote High Technology, with Gore in Charge," New York Times, November 10, 1992. 72. Ann P. Bishop, "The National Information Infrastructure: Policy Trends and Issues," ERIC Digest (1993), http://www.ericdigests.org/1994/information.htm. 73. "In'ter.ac'tive," Newsweek, May 31, 1993. 74. Mark Landler and Ronald Grover, "Media Mania," Business Week, June 12, 1993. 75. Cindy Skrzycki and Paul Farhi, "The Multimedia Feeding Frenzy; As Technology Converges, So Are Communications Giants Looking for Deals—And Billions in Future Profits," Washington Post, May 23, 1993. 76. "The Internet," Business Week, November 14, 1994. 77. John W. Verity and Robert D. Hof, "The Internet," BusinessWeek, November 14, 1994, 80, http://www.businessweek.com/archives/1994/b339876.arc.htm. 78. Verity and Hof, "Internet," 80. 79. Alan Greenspan, The Age of Turbulence: Adventures in a New World (New York: Penguin, 2007), 164. 80. Adam Lashinsky, "How Netscape Lost Its Way," Fortune, July 14, 2005, http://www.leighbureau.com/speakers/ALashinsky/essays/netscape.pdf. 81. Junius Ellis, "These Internet Stocks Could Get You On-line for 72% Profits in a Year," Money 24 (1995): 33. 82. Trahan, Walters, and Portny, "Asset Bubbles," 6. 83. Shiller, Irrational Exuberance, 118. 84. See, for example, Larry Schwerin, "Technologies of the Internet Revolution," Global Executive Forum Denver Institute for International Business Center for International Business Education and Research (Denver, CO: 2000). 85. Dilip Abreu and Markus K. Brunnermeier, "Bubbles and Crashes," Econometrica 71 (2003): 178. 86. Trahan, Walters, and Portny, "Asset Bubbles," 8. 87. John E. Fitzgibbon Jr., "Yahoo! Jumps 152% in Day One," IPO Reporter, April 22, 1996, http://www.lexisnexis.com. 88. Mary Lowengard, "Home-run Hitters of 1997," Institutional Investor, March 1998, 95–102. 89. Greg Ip, "Internet Stock Frenzy Is Mania of Manias: AOL Shakes UP S&P as Market Cap Gets Bigger than Pepsico, GM," Globe and Mail, December 30, 1998, http://www.lexisnexis.com. 90. Eric Janszen, "The Next Bubble: Priming the Market for Tomorrow's Big Crash," Harper's Magazine, February 2008, 41. 91. Mark Tran, "Prospectors Aim to Net Billions in Virtual Gold Rush," Guardian City, July 28, 1998, http://www.lexisnexis.com. 92. Armen A. Alchian, "Uncertainty, Evolution, and Economic Theory," Journal of Political Economy 58 (1950), 213–14. 93. Matthew May, "The Future Is Not Here Yet," Times, October 29, 1993, http://www.lexisnexis.com. 94. Skrzycki and Farhi, "Multimedia Feeding Frenzy." 95. Alan Greenspan, "Remarks by Chairman Alan Greenspan at the Annual Dinner and Francis Boyer Lecture of the American Enterprise Institute for Public Policy Research, Washington, DC," Federal Reserve Board, December 5, 1996. 96. Erick Schonfeld, "How Much Are Your Eyeballs Worth?" Fortune, February 21, 2000, 197–204. 97. "CMGI Unloads Internet Stocks as Losses Widen," Reuters, December 14, 2000. 98. Markus K. Brunnermeir and Stefan Nagel, "Hedge Funds and the Technology Bubble," Journal of Finance 59 (2004): 2013–40. 99. Tran, "Prospectors," 19. 100. Andreas Whittam Smith, "Everyone Wants a Ride on This Bandwagon," Independent, June 17, 1996. 101. Alan Greenspan, "The Revolution in Information Technology" (remarks, Boson College Conference on the New Economy, Boston, Massachusetts, March 6, 2000), http://www.federalreserve.gov/boarddocs/speeches/2000/20000306.htm. 102. Dawn Kawamoto, "The Globe.com's IPO One for the Books," CNET News, November 13, 1998, http://news.cnet.com/2100-1023-217913.html. 103. Beunza and Garud, "Calculators, Lemmings," 13–39. 104. Joseph Nocera, "Do You Believe? How Yahoo Became a Blue Chip," Fortune, June 7, 1999, http://money.cnn.com/magazines/fortune/fortune_archive/1999/06/07/261087/index.htm. 105. Ofek and Richardson, "DotCom Mania," 1113. 106. Nocera, "Do You Believe?" 107. "IPO Statistics," Frontline, PBS, May 2001, http://www.pbs.org/wgbh/pages/frontline/shows/dotcon/thinking/stats.html. 108. Jim Breyer, interview by Martin Smith, Frontline, PBS, May 2001. 109. Abreu and Brunnermeier, "Bubbles and Crashes," 174. 110. Adam Hill, "News of the Dot-Com's Death Is Exaggerated," PR Week, April 7, 2000, http://www.lexis.nexis.com. 111. George Soros, The Alchemy of Finance (Hoboken, NJ: John Wiley and Sons, 2003), 2. 112. Shiller, Irrational Exuberance, 60. 113. John Galbraith, A Short History of Financial Euphoria (Knoxville, TN: Whittle, 1990), 3. 114. Brad M. Barber and Terrance Odean, "The Internet and the Investor," Journal of Economic Perspectives 15 (2001): 49, 51. 115. Shiller, Irrational Exuberance, 52. 116. Kindelberger, Manias, 15. 117. Barber and Odean, "Internet," 47. 118. Tom Johnson, "That's AOL Folks," CNNMoney, January 10, 2000, http://money.cnn.com/2000/01/10/deals/aol_warner/. 119. David M. Ewalt, "The Dot-Com Super Bowl—5 years later," Forbes.com, January 31, 2005, http://www.msnbc.msn.com/id/6877753/. 120. Shiller, Irrational Exuberance, 45. 121. Jon Elster, "Emotions and Economic Theory," Journal of Economic Literature 36 (1998): 50. 122. "IPO Statistics," Frontline, PBS, May 2001, http://www.pbs.org/wgbh/pages/frontline/shows/dotcon/thinking/stats.html. 123. John Maynard Keynes, The General Theory of Employment, Interest and Money (1942; 2007), Greenspan, March 6, 2000, Abreu and "Bubbles and Crashes," 126. "How and the Internet October 4, J. "The of The and the of American Yale Journal on (2003): Robert E. and Federal Reserve Interest to a Economy Policy Institute January 29, 2001, Lux, "Herd 130. Kindelberger, Manias, 100. The of the by President and of the March 14, 2000. March 2000, D. "What the Internet Bubble A Its or How a Big Social Science Research 2005), Free Fall on and The News with April 14, 2000, http://www.lexisnexis.com. and James on Net USA Today, February 2000, http://www.lexisnexis.com. and "Economic Wall Madness The World Today, April 17, 2000, http://www.lexisnexis.com. 137. is to Joseph A. and (1942; New York: and and 2. and "A Internet in 2000," Review of Studies (2001): the So Journal (2003): 53. Earl, and Potts, Plato, in ed. John M. Company, Abolafia, Making 83. 144. Joseph N. and on Wall on at of the April 2000, http://www.lexisnexis.com. in Internet and Technology 23, 2000, http://www.lexisnexis.com. David Wall Street Its Independent, April 29, of 226. John C. "The and of the Journal of Economic Perspectives (2007): 91. and "How Is Wall BusinessWeek, May 13, George The at in New York Times, July 31, http://www.lexisnexis.com. Peter G. May Be Times, January 13, 2008, Richard The Economics of and in the Age of Information (Chicago: University of Chicago Press, 2006), 17. Ronald Walter and Rhetorical as Philosophy and Rhetoric (2004): L. and James of A to Philosophy and Rhetoric 154. John Galbraith, Short 2. A on Rhetoric and Quarterly Journal of Speech (2004): Luc Boltanski and Laurent Thévenot, "The Sociology of European Journal of Social Theory Investors BusinessWeek, February 13, Greenspan, Age of 464. The The of the (New York: 2007), Daniel "The New Newsweek, October 13, 2008, 31. "A New Age of Global With the American in Its European and Newsweek, October 13, 2008. Robert Shiller, Money than Newsweek, December 30, on Thomas Goodnight G. Thomas Goodnight is at of Communication Sandy Green Sandy Edward is of at the University of Southern California