7:27pm

Tue January 11, 2011
Planet Money

The Tuesday Podcast: Our Cute Animal Experiment, Explained

Originally published on Thu June 7, 2012 8:04 pm

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Last month, we asked you to participate in our economics experiment. On today's podcast, we dive into the results.

Everybody who participated saw the same three animal videos. But people were randomly assigned to two different groups. One group was asked to pick the animal they thought was the cutest. The other group was asked to pick the animal that they thought was most likely to be voted cutest by other participants.

Here are the results:

The inspiration for the experiment comes from John Maynard Keynes. He famously compared the stock market to a contest where a newspaper shows photographs of several different women, and readers try to guess which woman will be voted most attractive. So it winds up being all about guessing what other people will think.

This kind of thinking can contribute to bubbles. If everybody's buying a stock just because they think everybody else is going to buy it too, the price can go through the ceiling — even if no one thinks the stock has any fundamental value.

For more: The Keynesian beauty contest comes from chapter 12, section V of the General Theory, which is online here. You can watch all the animal videos on our experiment page. And, finally, here's your bonus video of a loris eating some kind of larva.

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Copyright 2012 National Public Radio. To see more, visit http://www.npr.org/.

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