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    Extraordinary Popular Delusions and the Madness of Crowds: Financial edition
    Extraordinary Popular Delusions and the Madness of Crowds: Financial edition
    Extraordinary Popular Delusions and the Madness of Crowds: Financial edition
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    Extraordinary Popular Delusions and the Madness of Crowds: Financial edition

    By Charles Mackay

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    First published in 1841, Extraordinary Popular Delusions and the Madness of Crowds is often cited as the best book ever written about market psychology. This Harriman House edition includes Charles Mackay's account of the three infamous financial manias - John Law's Mississipi Scheme, the South Sea Bubble, and Tulipomania.
    Between the three of them, these historic episodes confirm that greed and fear have always been the driving forces of financial markets, and, furthermore, that being sensible and clever is no defence against the mesmeric allure of a popular craze with the wind behind it.
    In writing the history of the great financial manias, Charles Mackay proved himself a master chronicler of social as well as financial history. Blessed with a cast of characters that covered all the vices, gifted a passage of events which was inevitably heading for disaster, and with the benefit of hindsight, he produced a record that is at once a riveting thriller and absorbing historical document. A century and a half later, it is as vibrant and lurid as the day it was written.
    For modern-day investors, still reeling from the dotcom crash, the moral of the popular manias scarcely needs spelling out. When the next stock market bubble comes along, as it surely will, you are advised to recall the plight of some of the unfortunates on these pages, and avoid getting dragged under the wheels of the careering bandwagon yourself.
    LanguageEnglish
    PublisherHarriman House
    Release dateFeb 2, 2011
    ISBN9780857191076
    Extraordinary Popular Delusions and the Madness of Crowds: Financial edition

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    Reviews for Extraordinary Popular Delusions and the Madness of Crowds

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    • 4/5
      It was amazing how relevant this book, written in 1841, was to today. Of all the “popular delusions” covered here, the only thing I can think of that doesn’t still go on today is Alchemy. This would shock and disappoint the author I’m sure. It did me.

      The tone of the book is a little more anecdotal than scholarly, but he does provide footnotes for much of it. I don’t think I would take it as 100% historical fact though. The author is really funny and sarcastic and writes in a manner very friendly to the modern reader. The only only problem I had was with names of people that I was obviously meant to recognize, but didn’t, and like many books of the time he quotes untranslated French (and Italian if I remember correctly) at times expecting that any educated person should be able to understand.

      This is a book I have to recommend every one read. It gives you a bigger perspective on just how ridiculous people can be, especially in groups, and how people aren’t really any different than they’ve ever been. A really great book, the only reason I’m giving it 4 stars instead of 5 is that it could use some editing. He goes on too long about Alchemy (almost 200 pages) giving too many case histories in detail. This happens to a smaller extent in a lot of the book, but you shouldn’t let that put you off. Even though I’m giving it 4 stars for that, it’s a book that made a huge impression on me.

      edit; OK, I just discovered the Breatharians, who claim to not have to eat or drink, and will sell you the secret of eternal life. This is a large part of exactly the same scams the Alchemists used, so I guess everything in this book still goes on. Amazing.
    • 5/5
      The German philosopher Friedrich Schiller tells us, "Anyone taken as an individual is tolerably sensible and reasonable - as a member of a crowd, he at once becomes a blockhead." Written in 1841 by Charles McKay, Extraordinary Popular Delusions outlines classic episodes of mass behavior in history. These include worship of alchemists, fortune-tellers, haunted houses, and "popular follies of great cities". For modern context, Andrew Tobias comments in the book's forward about "'the hustle', where large groups of young people learned to dance in lemminglike unison." How quaint. And, hilariously, the book's original title was Extraordinary Popular Delusions and the Madness of Krauts. In our current day there are still "bubbles" and other evidence of the continuing predilection of the masses to follow dim ideas beyond the bounds of reason.
    • 4/5
      ‘But you do not tell us your age,’ said Madame du Pompadour to him on another occasion; ‘and yet you pretend you are very old. The Countess de Gergy, who was, I believe, ambassadress at Vienna some fifty years ago, says she saw you there, exactly the same as you now appear.’‘It is true, madame,’ replied St. Germain; ‘I knew Madame de Gergy many years ago.’ ‘But, according to her account, you must be more than a hundred years old?’ ’That is not impossible,’ said he, laughing; ‘but it is much more possible that the good lady is in her dotage.’ ‘You gave her an elixir, surprising for the effects it produced; for she says, that during a length of time she only appeared to be eighty-four, the age at which she took it. Why don’t you give it to the king?’‘Oh, madame,’ he explained, ‘the physicians would have me broken on the wheel, were I to think of drugging his majesty.’This book, which dates from the middle of the 19th century, is a history of various obsessions and forms of collective madness that have taken hold at various historical periods. Starting with the South Sea Bubble and a similar financial crisis in France a few years earlier, it moves on to sections about tulips, alchemy, the Crusades, witch mania, etc.There were some fascinating facts in the section about alchemists; some men who claimed to have discovered the philosophers' stone were actually using it as a cover to explain away large amounts of money that they had acquired by illegal means, while there were some astrologers who did not believe in the powers of the stars at all and only cast nativities in order to subsidise their scientific studies in astronomy.Towards the end of the book, however, a lighter note was sounded in a section about those phrases which came into vogue amongst Londoners for a period of time before being replaced by something new. This section included phrases that have lasted until today, such as 'flare up' and 'does your mother know you're out?' and others that are long forgotten like 'quoz!' and 'what a shocking bad hat!'.
    • 5/5
      You want to know how the subprime mortgage and CDS crisis came about? How the 2000 tech bubble was blown and collapsed? Read this book written in the 1840s (no, that's not a misprint). Plus ça change… The style is a beautiful early Victorian English, and worth reading for that reason alone, but the content should be compulsory reading for anyone entering an investment bank, or indeed, any kind of business where risks are taken.
    • 4/5
      A good start towards an encyclopedia of human folly and suggestibility. Also, kind of an interesting exploration of a lot of the dead ends we explored before we came upon the more stable systems of modern science, economics, politics, etc. Very entertaining too, in a schadenfreudenous sort of way.
    • 5/5
      I read the first chapter on John Law and his creation of a paper money supply in France. Of course I was able to draw parallels between the Fiat money creation of 18th Century France to the Federal Reserve system of today. Nothing has changed! I was only able to get through the first story, before I decided to put it down. I think I understand the point and really didn't need to go further. Plus, I hate to say it, the writing style does not really draw me in.
    • 4/5
      This is a great one to have around to find little stories to remind you of just how ridiculous and stupid the collective is when it all runs after the same things. I am not minimizing the damage of the phenomenon to the finite lives of individuals. The damage is deadly for many, but you will not be surprised to learn how often these ridiculous financial disasters have happened in the past that defy all Adam Smith et al's notions of "rational expectations". What a joke. Problem is, the numbers keep getting bigger and bigger and the timing is faster and faster, and maybe the disaster is deeper and deeper. If things are working out though, we might be recovering faster too, if not personally destroyed by the melee.
    • 4/5
      These three chapters, extracted from a much longer work, constitute a good primer for understanding the mechanics of speculative investment crazes. John Law's Mississippi Company is described, along with the Tulip Mania of the Netherlands and the less-well-known South Sea scheme in England.This is an old book (1841) with some anachronistic vocabulary, but still reads as easy as any piece of modern journalism.

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    Extraordinary Popular Delusions and the Madness of Crowds - Charles Mackay

    Publishing details

    HARRIMAN HOUSE LTD

    3A Penns Road

    Petersfield

    Hampshire

    GU32 2EW

    GREAT BRITAIN

    Tel: +44 (0)1730 233870

    Fax: +44 (0)1730 233880

    email: enquiries@harriman-house.com

    website: www.harriman-house.com

    First published in 1841 under the title Memoirs of Extraordinary Popular Delusions.

    This edition first published by Harriman House, 2003.

    Reprinted 2006, 2007 and 2008.

    This eBook edition 2011.

    Copyright © Harriman House Ltd

    ISBN: 978-0-85719-107-6

    British Library Cataloguing in Publication Data

    A CIP catalogue record for this book can be obtained from the British Library.

    All rights reserved; no part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise without the prior written permission of the Publisher. This book may not be lent, resold, hired out or otherwise disposed of by way of trade in any form of binding or cover other than that in which it is published without the prior written consent of the Publisher.

    This publication is sold on the understanding that the publisher is not engaged in rendering legal, accountancy, financial, or other professional advice or services.

    No responsibility for loss occasioned to any person or corporate body acting or refraining to act as a result of reading material in this book can be accepted by the publisher, by the author, or by the employers of the author.

    PREFACE

    The object of the Author in the following pages has been to collect the most remarkable instances of those moral epidemics which have been excited, sometimes by one cause and sometimes by another, and to show how easily the masses have been led astray, and how imitative and gregarious men are, even in their infatuations and crimes.

    Some of the subjects introduced may be familiar to the reader; but the Author hopes that sufficient novelty of detail will be found even in these, to render them acceptable, while they could not be wholly omitted in justice to the subject of which it was proposed to treat. The memoirs of the South-Sea madness and the Mississippi delusion are more complete and copious than are to be found elsewhere; and the same may be said of the history of the Witch Mania, [¹] which contains an account of its terrific progress in Germany, a part of the subject which has been left comparatively untouched by Sir Walter Scott, in his Letters on Demonology and Witchcraft, the most important that have yet appeared on this fearful but most interesting subject.

    Popular delusions began so early, spread so widely, and have lasted so long, that instead of two or three volumes, fifty would scarcely suffice to detail their history. The present may be considered more of a miscellany of delusions than a history, a chapter only in the great and awful book of human folly which yet remains to be written, and which Porson once jestingly said he would write in five hundred volumes! Interspersed are sketches of some lighter matters,—amusing instances of the imitativeness and wrongheadedness of the people, rather than examples of folly and delusion.

    Religious manias have been purposely excluded as incompatible with the limits prescribed to the present work;—a mere list of them would alone be sufficient to occupy a volume.

    In another volume should these be favourably received, the Author will attempt a complete view of the progress of Alchemy and the philosophical delusions that sprang from it, including the Rosicrucians of a bygone, and the Magnetisers of the present, era.

    London, April 23rd, 1841

    Endnote

    1 This reference to Witch Mania and the reference to Alchemy in the following text refer to chapters that are not included in this edition. This reprint contains the chapters that relate only to speculation and financial markets. [return to text]

    PREFACE: TO EDITION OF 1852

    In reading the history of nations we find that, like individuals, they have their whims and their peculiarities; their seasons of excitement and recklessness, when they care not what they do. We find that whole communities suddenly fix their minds upon one object, and go mad in its pursuit; that millions of people become simultaneously impressed with one delusion, and run after it, till their attention is caught by some new folly more captivating than the first. We see one nation suddenly seized, from its highest to its lowest members, with a fierce desire of military glory; another as suddenly becoming crazed upon a religious scruple; and neither of them recovering its senses until it has shed rivers of blood and sowed a harvest of groans and tears, to be reaped by its posterity. At an early age in the annals of Europe its population lost their wits about the sepulchre of Jesus, and crowded in frenzied multitudes to the Holy Land; another age went mad for fear of the devil, and offered up hundreds of thousands of victims to the delusion of witchcraft. At another time, the many became crazed on the subject of the philosopher’s stone, and committed follies till then unheard of in the pursuit. It was once thought a venial of fence, in very many countries of Europe, to destroy an enemy by slow poison. Persons who would have revolted at the idea of stabbing a man to the heart, drugged his potage without scruple. Ladies of gentle birth and manners caught the contagion of murder, until poisoning, under their auspices, became quite fashionable. Some delusions, though notorious to all the world, have subsisted for ages, flourishing as widely among civilized and polished nations as among the early barbarians with whom they originated,—that of duelling, for instance, and the belief in omens and divination of the future, which seem to defy the progress of knowledge to eradicate them entirely from the popular mind. Money, again, has often been a cause of the delusion of multitudes. Sober nations have all at once become desperate gamblers, and risked almost their existence upon the turn of a piece of paper. To trace the history of the most prominent of these delusions is the object of the present pages. 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.

    Some of the subjects introduced may be familiar to the reader; but the Author hopes that sufficient novelty of detail will be found even in these, to render them acceptable, while they could not be wholly omitted in justice to the subject of which it was proposed to treat. The memoirs of the South Sea madness and the Mississippi delusion are more complete and copious than are to be found elsewhere; and the same may be said of the history of the Witch Mania, which contains an account of its terrific progress in Germany, a part of the subject which has been left comparatively untouched by Sir Walter Scott in his Letters on Demonology and Witchcraft, the most important that have yet appeared on this fearful but most interesting subject.

    Popular delusions began so early, spread so widely , and would have lasted so long, that instead of two or three volumes, fifty would scarcely suffice to detail their history. The present may be considered more of a miscellany of delusions than a history—a chapter only in the great and awful book of human folly which yet remains to be written, and which Porson once jestingly said he would write in five hundred volumes! Intersperced are sketches of some lighter matters,—amusing instances of the imitativeness and wrongheadedness of the people, rather than examples of folly and delusion.

    MONEY MANIA — THE MISSISSIPPI SCHEME

    Some in clandestine companies combine; Erect new stocks to trade beyond the line; With air and empty names beguile the town, And raise new credits first, then cry ’em down; Divide the empty nothing into shares, And set the crowd together by the ears.

    Defoe

    The personal character and career of one man are so intimately connected with the great scheme of the years 1719 and 1720, that a history of the Mississippi madness can have no fitter introduction than a sketch of the life of its great author John Law. Historians are divided in opinion as to whether they should designate him a knave or a madman. Both epithets were unsparingly applied to him in his lifetime, and while the unhappy consequences of his projects were still deeply felt. Posterity, however, has found reason to doubt the justice of the accusation, and to confess that John Law was neither knave nor madman, but one more deceived than deceiving, more sinned against than sinning. He was thoroughly acquainted with the philosophy and true principles of credit. He understood the monetary question better than any man of his day; and if his system fell with a crash so tremendous, it was not so much his fault as that of the people amongst whom he had erected it. He did not calculate upon the avaricious frenzy of a whole nation; he did not see that confidence, like mistrust, could be increased almost ad infinitum, and that hope was as extravagant as fear. How was he to foretell that the French people, like the man in the fable, would kill, in their frantic eagerness, the fine goose he had brought to lay them so many golden eggs? His fate was like that which may be supposed to have overtaken the first adventurous boatman who rowed from Erie to Ontario. Broad and smooth was the river on which he embarked; rapid and pleasant was his progress; and who was to stay him in his career? Alas for him! the cataract was nigh. He saw, when it was too late, that the tide which wafted him so joyously along was a tide of destruction; and when he endeavoured to retrace his way, he found that the current was too strong for his weak efforts to stem, and that he drew nearer every instant to the tremendous falls. Down he went over the sharp rocks, and the waters with him. He was dashed to pieces with his bark; but the waters, maddened and turned to foam by the rough descent, only boiled and bubbled for a time, and then flowed on again as smoothly as ever. Just so it was with Law and the French people. He was the boatman, and they were the waters.

    John Law was born at Edinburgh in the year 1671. His father was the younger son of an ancient family in Fife, and carried on the business of a goldsmith and banker. He amassed considerable wealth in his trade, sufficient to enable him to gratify the wish, so common among his countrymen, of adding a territorial designation to his name. He purchased with this view the estates of Lauriston and Randleston, on the Firth of Forth, on the borders of West and Mid Lothian, and was thenceforth known as Law of Lauriston. The subject of our memoir, being the

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