From 18064f2e9d8237454a04052880672d8f1f0225b1 Mon Sep 17 00:00:00 2001 From: sdiehl Date: Mon, 28 Mar 2022 19:47:57 +0100 Subject: [PATCH] Madness of crowds --- concepts/madness-crowds.md | 10 ++++++++++ 1 file changed, 10 insertions(+) diff --git a/concepts/madness-crowds.md b/concepts/madness-crowds.md index 18b8449..ccfaf5d 100644 --- a/concepts/madness-crowds.md +++ b/concepts/madness-crowds.md @@ -1 +1,11 @@ # 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. \ No newline at end of file