Socionomic Theory

The essence of Prechter’s socionomic hypothesis is that fluctuations in social mood — producing waves of optimism and pessimism — are a natural result of human association and have consequences in social action. Social mood is not conscious, rational and objectively reactive but unconscious, non-rational and subjectively active. While people almost universally believe that the character of social events determines social mood, socionomics recognizes that the causality is the reverse: Social mood determines the character of social actions. The causality of social mood is unidirectional; there is no feedback loop of events back to social mood. Events do stimulate brief emotional reactions, but they are transient and do not affect social mood.

Some forums of activity are ideal for the immediate expression of social mood. The one in which the most detailed and pristine data exist is the stock market, where investors adjust aggregate stock prices almost immediately to express changes in social mood. Other qualities and activities, such as facial expressions, voice timbre, the music people choose to hear and the clothes they choose to wear, might serve as equally good “sociometers” if accurate data were available.

Many actions taken in response to trends in social mood take time to manifest. For example, business people might decide, in expressing the social mood, to expand or contract operations. But it takes time to implement such plans, so changes in macroeconomic activity lag changes in social mood and the stock market. The same is true of political actions, which generally require a large consensus and thereby substantially lag mood and the markets as well. This is why sociometers such as the stock market averages are leading indicators of macroeconomic trends and political actions.

Socionomics postulates that waves of social mood are endogenously regulated, fluctuating toward the “positive” and then the “negative” direction according to a patterned, hierarchical fractal called the Wave Principle, identified and developed as a stock market model by Ralph Nelson Elliott in the 1930s. Waves have substantial quantitative leeway but adhere to one overall form, under which there are five specific forms and a limited number of variations thereof, as described in the literature. Because Elliott waves are patterned, they are probabilistically predictable, thereby making the character of social trends probabilistically predictable as well.

Essential publications relating to socionomics include:

Scholarly Papers

“The Financial/Economic Dichotomy in Social Behavioral Dynamics: The Socionomic Perspective,” by Prechter and Wayne D. Parker. Journal of Behavioral Finance, 2007.

“Social Mood, Stock Market Performance and U.S. Presidential Elections: A Socionomic Perspective on Voting Results,” by Prechter, Deepak Goel, Wayne D. Parker and Matthew Lampert. SAGE Open, 2012. It was SSRN’s third-most-downloaded paper in 2012.


The Wave Principle of Human Social Behavior and the New Science of Socionomics (1999)

Pioneering Studies in Socionomics (2003)

The Socionomic Theory of Finance (2016)

Socionomic Studies of Society and Culture (2017)

Socionomic Causality in Politics (2017)


History’s Hidden Engine (2006)
Watch the full documentary at this link.

Broader Discussions of Socionomics (2006)

Toward a New Science of Social Prediction: Robert Prechter at the London School of Economics (2009)

Prechter at Oxford, Cambridge and Trinity: Offering a New View of Financial and Social Causality (2013)

The Socionomic Theory of Finance: An Alternative to EMH and a Foundation for Technical Analysis (2016)

Monthly Magazine

The Socionomist

Notable articles/books/papers that discuss socionomics:

I Know What You’ll Do Next Summer,” New Scientist, August 31, 2002, by John Casti.

“A Literature Review of Social Mood,” Journal of Behavioral Finance, 2006, by Kenneth R. Olson.

Mood Matters: From Rising Skirt Lengths to the Collapse of World Powers, 2010, by John Casti.

Ahead of Change: How Crowd Psychology and Cybernetics Transform the Way We Govern, 2011, by Constantin Malik.

Moods and Markets: A New Way to Invest in Good Times and in Bad, 2012, by Peter Atwater.