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Gossip is key to economic outcomes

by CIFAR Oct 8 / 14
Image above: Norman Rockwell – The Gossips [1948]

The best way to spread information through a community is by way of the village gossip, according to a study conducted in India, and finding that person could be as simple as asking around.

Gossip can have a powerful influence on economic outcomes, says Matthew Jackson (Stanford University), a senior fellow in CIFAR’s Institutions, Organizations & Growth program and a co-author on the working paper published by the National Bureau of Economic Research. For example, an organization offering a new microfinance initiative with loans for entrepreneurs must get the word out or no one will benefit.

“Getting people to participate in beneficial programs, such as microfinance, requires people being aware of the program and understanding its potential benefits to them,” Jackson says. “If we want to seed information in a community to effectively spread information, who are the best people to talk to first?”

A previous study by Jackson and his colleagues, Abhijit Banerjee and Esther Duflo at the Massachusetts Institute of Technology and Arun Chandrasekhar at Stanford University, developed a model for finding the people central to spreading information, after years of gathering data on the social networks of 43 villages in India. However, the time and cost of mapping social networks this way was impractical for governments and organizations looking to spread information quickly and efficiently.

In the new study, the researchers instead asked people to name the best person to talk to in the village if they wanted to spread information about a new loan product or a local event. People consistently named the same individuals, and their answers were remarkably close to the results produced by the model.

“This means that we can just go into a community, ask a few people who they think are the best people to use as starting points for diffusing information, and their answers will actually be very accurate,” Jackson says.

Those identified as gossips were not always community leaders. They had combinations of qualities including status, leadership roles and a central position in the network. The researchers argue this research has major implications for policy because it provides an easy way to collect valuable information about how information spreads. In the case of microfinance initiatives, this could mean the difference between fuelling innovative ideas or floundering.

Jackson says the work has implications in the developed world as well, though access to media plays a greater role.

“Various media can amplify communication, but ultimately it is still networks of humans who are communicating — and understanding those communication patterns is vital to understanding which new programs, policies, and products succeed and which ones fail,” he says.

Jackson says his participation in CIFAR’s Institutions, Organizations & Growth program was influential on this research.

“The basic question of how social structure affects the success or failure of different programs is central to Institutions, Organizations & Growth and has become engrained in my thinking as a result of my IOG participation. That question really drove this research.”