The Sociological Factors Beneath the Slump

Robert Shiller:

The Sickness Beneath the Slump, by Robert Shiller, Commentary, NY Times: The origins of the current economic crisis can be traced to a particular kind of social epidemic: a speculative bubble that generated pervasive optimism and complacency. That epidemic has run its course. But we are now living with the malaise it caused.

News accounts of the economic crisis rarely put it in these terms. They tend to focus on distinct short-term developments or on the roles of prominent people like Federal Reserve governors, members of Congress or Wall Street financiers. These stories grab attention and may be supported by ... economic statistics...

But the economic situation is primarily driven by hard-to-quantify sociological factors that play out over many years. ...

He ends with:

... A half-century ago, there was a lively discussion among economists about the dynamics of price expectations. For example, Alain C. Enthoven ... and Kenneth J. Arrow ... wrote in 1956 that expectations that extrapolate past price increases can produce economic instability. But that thinking was largely cast aside in the 1960s, when my profession embraced the theory that efficient markets formed by people holding rational expectations could explain virtually all economic activity.

As a result, economists in recent decades have not developed expectations theory much further. That needs to be corrected in coming years. In the meantime, this failing helps explain why the current crisis was generally unpredicted, and why its future course is so poorly understood.

It's not clear to me what the "hard-to-quantify sociological factors" are. He mentions contagions of optimism and pessimism and the subsequent malaise, but not much else. I'm also not sure how the sociological factors that he cites as the primary drivers of our economic situation connect to the conclusion. I think he's saying that expectations in our theoretical models need to account for the hard-to-quantify sociological factors, contagions, etc. But he's not very specific at all about what he means. Maybe I'm missing something obvious -- does anyone want to clarify?