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Madness of crowds

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# Madness of Crowds
The term *madness of crowds* is a concept concerning the extreme and abberant conditions of group psychology in markets. The term was coined by Charles Mackay in 1841 in his book *Extraordinary Popular Delusions and the Madness of Crowds* which annaled the historical [market manias](market-mania.md) and [bubble](bubble.md) of the 17th and 18th centuries.
> Men, it has been well said, think in herds; it will be seen that they go mad in herds, while they only recover their senses slowly, and one by one.
The term has since been adopted to describe mass irrationality in markets derived from [bandwagon-bias](bandwagon-bias.md), profit seeking and trend following behaviour gone badly at scale.
## References
1. Mackay, Charles. 2012. Extraordinary Popular Delusions and the Madness of Crowds. Simon and Schuster.
1. Bernstein, William J. 2021. The Delusions of Crowds: Why People Go Mad in Groups. Grove Press.
1. Blanchard, Olivier J, and Mark W Watson. 1982. ‘Bubbles, Rational Expectations and Financial Markets’. NBER Working Paper, no. w0945.