12 lines
1.2 KiB
Markdown
12 lines
1.2 KiB
Markdown
# Madness of Crowds
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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.
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> 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.
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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.
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## References
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1. Mackay, Charles. 2012. Extraordinary Popular Delusions and the Madness of Crowds. Simon and Schuster.
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1. Shiller, Robert J. 2015. ‘Irrational Exuberance’. In Irrational Exuberance. Princeton university press.
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1. Bernstein, William J. 2021. The Delusions of Crowds: Why People Go Mad in Groups. Grove Press.
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1. Blanchard, Olivier J, and Mark W Watson. 1982. ‘Bubbles, Rational Expectations and Financial Markets’. NBER Working Paper, no. w0945. |