House Price Crash: Wisdom of Crowds or Digital Maoism?

Sep

House Price Crash: Wisdom of Crowds or Digital Maoism?

Matilda Stutchbury Bank Rates 2011-09-25

Last week Mindful Money published an opinion piece critical of the online community House Price Crash. The response was immediate and vehement.We looked at the comments to make sense of the debate. Here’s what happened:

House Price Crash, a site which, in case you were unfamiliar, aims to:

“Act as a counterbalance to the huge amounts of positive spin the housing market receives in the mainstream media and provide anyone involved in the market with up to date data and commentary.

The response to “Inside the House Price Crash community ” was almost immediate, with early commenters channeling their inner Malcolm Tucker at the one sided portrayal of ‘the mighty HPC’ as one reader put it.

This was a typical comment:

“The writer of this poor excuse for journalism clearly misses the point. Deliberately so. HPCers don’t want to “cash in” on bargains… they want affordable housing – one of the basic needs of human beings – for all.” Chuffy

Fair enough.

And while affordable housing was a recurring theme that ran through many of the comments, exception was taken to the critical stance of the schadenfreude that characterizes a large part of the HPC forum.

Here are a few observations from the offending article:

“Basically contributors appear to be frustrated would-be first-time buyers who resent renting and are hoping prices will “crash” so they can cash in.”

“There’s obvious delight in any loss of homeowners’ equity”

By way of response, Mindful Money’s piece was posted by HPC onto their homepage which sparked an 8-page Discussion Thread replete with vitriol and ad hominem attacks (a thread which has since gathered more than 8,000+ views!).

Now, the arguments about house price inflation have two sides – there are those who think they are too high and must come down and those who think high prices are advantageous.

Although these arguments have their relative merits and worthy supporters and nay sayers on both sides and are worth exploring in some depth (we’ll list some below) they have been well rehearsed elsewhere and are less worthy of comment than the behaviour of the HPC forum users themselves and their manner of responding to points of view that they might not agree with.

What we’re interested in here at Mindful Money is the way that online ‘conversations’ like this one, where people of different viewpoints cross each others’ paths, almost inevitably splinter into polarisation and mudslinging.

Must internet communities of interest veer away from the Wisdom of Crowds towards the taking up and defending of extreme positions?

Here’s a comment from one reader:

“Ah the stubborn old HPC forum the broken clock of thediscussionforums. They are all one eyed bears now that they threw out any poster that didn’t agree withtheir view thathouseprices will drop by 50pc. There used to be some half decent debate there before theykickedout the nonbelieversbut now it is full of ne’er do wells that giveeachother high fives every time theydon’tbuy a house.”

Why does this happen?

Social psychologists have a term for this type of phenomenon – they call “biased assimilation” or “attitude polarisation”.

” A phenomenon in which a disagreement becomes more extreme as the different parties consider evidence on the issue ….the tendency of people to search for and interpret evidence selectively, to reinforce their current beliefs or attitudes …… this bias can potentially result in…. widening rather than narrowing the disagreement between them.” It’s what the French call “un dialogue de sourds” – literally a dialogue of the deaf but meaning a debate in which neither side is capable of listening to the other. The end result can be internet extremism where some very nasty people live in closed worlds where every external event serves to confirm their own world view. One such dialogue – literally – was the attack by certain deaf activists on hearing implants. And more recently, there was the internet blast (and death threats) against those researching chronic fatigue syndrome. US philosopher Jaron Lanier has called this “digital Maoism” – a beehive mind making us slaves to a central theme. A summary of his essay at Edge.org says: “The hive mind is for the most part stupid and boring. Why pay attention to it? It is part of the larger pattern of the appeal of a new online collectivism that is nothing less than a resurgence of the idea that the collective is all-wise, that it is desirable to have influence concentrated in a bottleneck that can channel the collective with the most verity and force. This is different from representative democracy, or meritocracy. This idea has had dreadful consequences when thrust upon us from the extreme Right or the extreme Left in various historical periods.”

Read an interview with him here. What we are witnessing in most of the house price posts is a form of “social cascade” where each post tends to refer to the previous rather than to discussing the points in the original article.

So in the interest of fairness, here are three reasons for lower prices and three for higher (or at least no price fall). Lower prices are good because:

Buying a property is increasingly difficult for those in their twenties and thirties unless the “bank of Mum and Dad” is generous.

High prices play into the hands of landlords who can set high rents thanks to the lack of affordable housing.

High prices – well above the historical relationship to earnings – are unsustainable and are only held up by ultra low interest rates. Homebuyers are living in a price bubble which must burst – and that will bring further economic trouble.

Current high prices are good because:

They help avoid negative equity (where loans are higher than the property’s value). This can prevent people moving for a new job or to accommodate a larger family as well as preventing losses to lenders.

They provide economic and social stability – plunging house prices prevent people moving and can lead, as in the United States, to areas where no one buys because they are waiting for “a cheaper tomorrow”.

Many wish to use the equity in their homes or buy-to-lets as a replacement for otherwise poor retirement pension prospects so they need high values.

It’s Mindful Money’s aim to go beyond the usual positions of right or wrong and open up a middle ground for discussion, to draw attention to group think and the limitations of right versus wrong. Naturally, some people won’t like this as it challenges their assumptions and threatens to loosen the social glue that binds them together in their certainty that they’re right and that others are to blame. But things are rarely that simple. And if House Price Crash attracts and repels readers in equal measure, well then, at least there’s something to talk about.

A final word:

For HPC

“For what it’s worth, I’ve never posted on HPC but have been reading it daily for several years. I find the site highly informative and often entertaining. I consider myself wiser and more clued-up about many areas of the economy and the political classesthanks to HPC, and have taken steps that have benefited me and my family based on the knowledge I have gained there. HPC opened my eyes, I salute you all, please keep up the good work.” Sideways

Against HPC

“House Price Crash was useful about five years ago. Now though, almost all members who weren’t uber-bearish on property have been banned – often without warning or notification. And that includes long-standing members too. What you’re left with now is a small community that wallows in self-agreement and frequent delusion, many of whom still be waiting and calling the crash in several years time.” Turnbull

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