Media effects and the question of the rational audience: lessons from the financial markets

This article offers evidence for an alternative perspective on the media effects debate. Early work on media influence, be it conservative or critical, assumed a causal link between mass media and mass behaviour. In contrast, decades of effects and audience research has established the inadequacy of this ‘strong effects’ paradigm. The main thrust of this counter-research is the realization that audiences actively consume and use the media for self-serving purposes. The alternative perspective offered here comes from a study of elite fund managers, their communications and decision-making in the London Stock Exchange. The research findings suggest that such individuals do respond actively to media, but, collectively, the results can be both self-defeating and on a mass scale. That is, individuals do not have to be ignorant nor act irrationally to contribute to media-instigated, collective irrationality.