Herd effect is often used in economics to describe the herd mentality of economic individuals. "Herd effect" means that everyone has herd mentality, which easily leads to blind obedience, and blind obedience often leads to fraud or failure.

"broken window theory" simply means "damage is beneficial", which means that if a person breaks the window of a barber shop when the market is completely saturated, although this behavior has caused damage to society, the barber's misfortune is the gospel of society, which will create business opportunities for glass manufacturers, who will buy products from other manufacturers after receiving the money.

2, the content is different

If a child breaks a window, it will inevitably lead to the window breaker replacing the glass, which will enable glass installers and glass producers to start working, thus promoting social employment.

Herd effect generally appears in highly competitive industries. If a leader occupies the main attention of this industry, then the whole flock will constantly imitate the leader's every move. Where this leader eats grass, other sheep will go for gold.

3. Different functions

Rational use and guidance of herding behavior can build regional brands and form scale effect, so as to obtain better results with more advantages than disadvantages. Finding a good leader is the key to using the herd effect.

If the window is broken, it should be repaired in time. If investors suffer heavy losses when speculating in foreign exchange, they should decisively close their positions and temporarily stop their operations. At this time, what investors need to do is to adjust their mentality and patiently look for the next opportunity to enter the market, instead of breaking the jar.

Baidu Encyclopedia-broken window theory

Baidu Encyclopedia-Herd Effect