Extraordinary Popular Delusions and the Madness of Crowds
Encyclopedia
Extraordinary Popular Delusions and the Madness of Crowds is a history of popular folly by Scottish journalist Charles Mackay
, first published in 1841. The book chronicles its subjects in three parts: "National Delusions", "Peculiar Follies", and "Philosophical Delusions". Despite its journalistic and rather sensational style, the book has gathered a body of academic support as a work of considerable importance in the history of social psychology and psychopathology.
The subjects of Mackay's debunking include economic bubble
s, alchemy
, crusades
, witch-hunt
s, prophecies
, fortune-telling
, magnetisers (influence of imagination in curing disease), shape of hair
and beard
(influence of politics and religion on), murder through poison
ing, haunted house
s, popular follies of great cities, popular admiration of great thieves, duel
s, and relics. Present day writers on economics, such as Andrew Tobias
and Michael Lewis
, laud the three chapters on economic bubbles.
Among the bubbles or financial manias described by Mackay are the South Sea Company bubble of 1711–1720, the Mississippi Company
bubble of 1719–1720, and the Dutch tulip mania
of the early seventeenth century. According to Mackay, during this bubble, speculators from all walks of life bought and sold tulip
bulbs and even futures contract
s on them. Allegedly some tulip bulb varieties briefly became the most expensive objects in the world during 1637. Mackay's accounts are enlivened by colorful, comedic anecdotes, such as the Parisian hunchback who supposedly profited by renting out his hump as a writing desk during the height of the mania surrounding the Mississippi Company
.
Two modern researchers, Peter Garber and Anne Goldgar, independently conclude that Mackay greatly exaggerated the scale and effects of the Tulip bubble, and Mike Dash, in a footnote to his modern popular history of the alleged bubble states that he believes the importance and extent of the tulip mania was overstated.
Slaughterhouse Five quotes part of the introduction to this section: "History in its solemn page informs us that the crusaders were but ignorant and savage men, that their motives were those of bigotry unmitigated, and that their pathway was one of blood and tears."
includes the financial mania chapters in his book The Real Price of Everything: Rediscovering the Six Classics of Economics as one of the six great works of economics, along with writings by Adam Smith
, Thomas Malthus
, David Ricardo
, Thorstein Veblen
, and John Maynard Keynes
.
James Surowiecki
in The Wisdom of Crowds
takes a different view of crowd behavior, saying that under certain circumstances, crowds or groups may have better information and make better decisions than even the best informed individual. Robert Bartholomew and Hilary Evans wrote Outbreak! The Encyclopedia of Extraordinary Social Behavior to be like a modern extension of Mackay's work which is more sympathetic to the point of view of participants.
Financier Bernard Baruch
credited the lessons he learned from Extraordinary Popular Delusions and the Madness of Crowds with his decision to sell all his stock ahead of the financial crash of 1929.
Neil Gaiman
borrows from the title in an issue of his popular comic series The Sandman, in a story featuring a writer whose novel is titled "...And the Madness of Crowds".
Author and executive coach Marshall Goldsmith
discussed the book in depth in BusinessWeek
, drawing extensive parallels between the financial bubbles Mackay wrote about and financial bubbles today. Other writers also frequently point to the book to explain recent financial bubbles.
Author and journalist Will Self
writes a column for New Statesman
, 'Madness of Crowds', which Self says takes it title from Mackay's book.
Forbes
magazine compared Mackay's descriptions of financial bubbles to the Chinese stock bubble of 2007, claiming that the "emotional feedback loop" that drove the Chinese market was very similar to what Mackay described.
The book was the initial inspiration for Richard Condie
's 1978 National Film Board of Canada
animated short John Law and the Mississippi Bubble.
Charles Mackay
Charles Mackay was a Scottish poet, journalist, and song writer.-Life:Charles Mackay was born in Perth, Scotland. His father was by turns a naval officer and a foot soldier; his mother died shortly after his birth. Charles was educated at the Caledonian Asylum, London, and at Brussels, but spent...
, first published in 1841. The book chronicles its subjects in three parts: "National Delusions", "Peculiar Follies", and "Philosophical Delusions". Despite its journalistic and rather sensational style, the book has gathered a body of academic support as a work of considerable importance in the history of social psychology and psychopathology.
The subjects of Mackay's debunking include economic bubble
Economic bubble
An economic bubble is "trade in high volumes at prices that are considerably at variance with intrinsic values"...
s, alchemy
Alchemy
Alchemy is an influential philosophical tradition whose early practitioners’ claims to profound powers were known from antiquity. The defining objectives of alchemy are varied; these include the creation of the fabled philosopher's stone possessing powers including the capability of turning base...
, crusades
Crusades
The Crusades were a series of religious wars, blessed by the Pope and the Catholic Church with the main goal of restoring Christian access to the holy places in and near Jerusalem...
, witch-hunt
Witch-hunt
A witch-hunt is a search for witches or evidence of witchcraft, often involving moral panic, mass hysteria and lynching, but in historical instances also legally sanctioned and involving official witchcraft trials...
s, prophecies
Prophecy
Prophecy is a process in which one or more messages that have been communicated to a prophet are then communicated to others. Such messages typically involve divine inspiration, interpretation, or revelation of conditioned events to come as well as testimonies or repeated revelations that the...
, fortune-telling
Fortune-telling
Fortune-telling is the practice of predicting information about a person's life. The scope of fortune-telling is in principle identical with the practice of divination...
, magnetisers (influence of imagination in curing disease), shape of hair
Hair
Hair is a filamentous biomaterial, that grows from follicles found in the dermis. Found exclusively in mammals, hair is one of the defining characteristics of the mammalian class....
and beard
Beard
A beard is the collection of hair that grows on the chin, cheeks and neck of human beings. Usually, only pubescent or adult males are able to grow beards. However, women with hirsutism may develop a beard...
(influence of politics and religion on), murder through poison
Poison
In the context of biology, poisons are substances that can cause disturbances to organisms, usually by chemical reaction or other activity on the molecular scale, when a sufficient quantity is absorbed by an organism....
ing, haunted house
Haunted house
A haunted house is a house or other building often perceived as being inhabited by disembodied spirits of the deceased who may have been former residents or were familiar with the property...
s, popular follies of great cities, popular admiration of great thieves, duel
Duel
A duel is an arranged engagement in combat between two individuals, with matched weapons in accordance with agreed-upon rules.Duels in this form were chiefly practised in Early Modern Europe, with precedents in the medieval code of chivalry, and continued into the modern period especially among...
s, and relics. Present day writers on economics, such as Andrew Tobias
Andrew Tobias
Andrew Tobias is an American journalist, author, and columnist. His main body of work is on investment, but he has also written on politics, insurance, and other topics. Since 1999, he has been the treasurer of the Democratic National Committee.-Biography:Tobias graduated from Harvard College in...
and Michael Lewis
Michael Lewis (author)
Michael Lewis is an American non-fiction author and financial journalist. His bestselling books include The Big Short: Inside the Doomsday Machine, Liar's Poker, The New New Thing, Moneyball: The Art of Winning an Unfair Game, The Blind Side: Evolution of a Game, Panic and Home Game: An...
, laud the three chapters on economic bubbles.
Economic bubbles
Mississippi Company
The "Mississippi Company" became the "Company of the West" and expanded as the "Company of the Indies" .-The Banque Royale:...
bubble of 1719–1720, and the Dutch tulip mania
Tulip mania
Tulip mania or tulipomania was a period in the Dutch Golden Age during which contract prices for bulbs of the recently introduced tulip reached extraordinarily high levels and then suddenly collapsed...
of the early seventeenth century. According to Mackay, during this bubble, speculators from all walks of life bought and sold tulip
Tulip
The tulip is a perennial, bulbous plant with showy flowers in the genus Tulipa, which comprises 109 species and belongs to the family Liliaceae. The genus's native range extends from as far west as Southern Europe, North Africa, Anatolia, and Iran to the Northwest of China. The tulip's centre of...
bulbs and even futures contract
Futures contract
In finance, a futures contract is a standardized contract between two parties to exchange a specified asset of standardized quantity and quality for a price agreed today with delivery occurring at a specified future date, the delivery date. The contracts are traded on a futures exchange...
s on them. Allegedly some tulip bulb varieties briefly became the most expensive objects in the world during 1637. Mackay's accounts are enlivened by colorful, comedic anecdotes, such as the Parisian hunchback who supposedly profited by renting out his hump as a writing desk during the height of the mania surrounding the Mississippi Company
Mississippi Company
The "Mississippi Company" became the "Company of the West" and expanded as the "Company of the Indies" .-The Banque Royale:...
.
Two modern researchers, Peter Garber and Anne Goldgar, independently conclude that Mackay greatly exaggerated the scale and effects of the Tulip bubble, and Mike Dash, in a footnote to his modern popular history of the alleged bubble states that he believes the importance and extent of the tulip mania was overstated.
Alchemists
The section on 'alchemysts' focuses primarily on efforts to turn base metals into gold. Mackay notes that many of these practitioners were themselves deluded, convinced that these feats could be performed if they discovered the correct old recipe or stumbled upon the right combination of ingredients. Although alchemists gained money from their sponsors, mainly noblemen, he notes that the belief in alchemy by sponsors could be hazardous to its practitioners, as it wasn't rare for an unscrupulous noble to imprison a supposed alchemist until he could produce gold.Other chapters
- Modern Prophecies.
- Fortune-Telling.
- The Magnetisers.
- Influence of Politics and Religion on the Hair and Beard.
Crusades
The history of the crusades is described as a kind of mania of the Middle Ages, precipitated by the pilgrimages of Europeans to the Holy lands. Mackay is generally unsympathetic to the crusaders whom he compares unfavourably to the superior civilisation of Asia. "Europe expended millions of her treasures, and the blood of two milions of her children; and a handful of quarrelsome knights retained possession of Palestine for about one hundred years!" Kurt Vonnegut'sKurt Vonnegut
Kurt Vonnegut, Jr. was a 20th century American writer. His works such as Cat's Cradle , Slaughterhouse-Five and Breakfast of Champions blend satire, gallows humor and science fiction. He was known for his humanist beliefs and was honorary president of the American Humanist Association.-Early...
Slaughterhouse Five quotes part of the introduction to this section: "History in its solemn page informs us that the crusaders were but ignorant and savage men, that their motives were those of bigotry unmitigated, and that their pathway was one of blood and tears."
Witch mania
Witch trials in 16th and 17th century Western Europe are the primary focus of the Witch Mania section of the book, which asserts that this was a time when ill fortune was likely to be attributed to supernatural causes. Mackay notes that many of these cases were initiated as a way of settling scores among neighbors or associates, and that extremely low standards of evidence were applied to most of these trials. Mackay claims that "thousands upon thousands" of people were executed as witches over two and a half centuries, with the largest numbers being killed in Germany and Spain.Other chapters
- The Slow Poisoners.
- Haunted Houses.
- Popular Follies of Great Cities.
- Popular Admiration of Great Thieves.
- Duels and Ordeals.
- Relics.
Influence and modern responses
The book is still in print. Writers continue to discuss the influence of the book, particularly the section on financial bubbles. Financial writer Michael LewisMichael Lewis (author)
Michael Lewis is an American non-fiction author and financial journalist. His bestselling books include The Big Short: Inside the Doomsday Machine, Liar's Poker, The New New Thing, Moneyball: The Art of Winning an Unfair Game, The Blind Side: Evolution of a Game, Panic and Home Game: An...
includes the financial mania chapters in his book The Real Price of Everything: Rediscovering the Six Classics of Economics as one of the six great works of economics, along with writings by Adam Smith
Adam Smith
Adam Smith was a Scottish social philosopher and a pioneer of political economy. One of the key figures of the Scottish Enlightenment, Smith is the author of The Theory of Moral Sentiments and An Inquiry into the Nature and Causes of the Wealth of Nations...
, Thomas Malthus
Thomas Malthus
The Reverend Thomas Robert Malthus FRS was an English scholar, influential in political economy and demography. Malthus popularized the economic theory of rent....
, David Ricardo
David Ricardo
David Ricardo was an English political economist, often credited with systematising economics, and was one of the most influential of the classical economists, along with Thomas Malthus, Adam Smith, and John Stuart Mill. He was also a member of Parliament, businessman, financier and speculator,...
, Thorstein Veblen
Thorstein Veblen
Thorstein Bunde Veblen, born Torsten Bunde Veblen was an American economist and sociologist, and a leader of the so-called institutional economics movement...
, and John Maynard Keynes
John Maynard Keynes
John Maynard Keynes, Baron Keynes of Tilton, CB FBA , was a British economist whose ideas have profoundly affected the theory and practice of modern macroeconomics, as well as the economic policies of governments...
.
James Surowiecki
James Surowiecki
James Michael Surowiecki is an American journalist. He is a staff writer at The New Yorker, where he writes a regular column on business and finance called "The Financial Page".-Background:...
in The Wisdom of Crowds
The Wisdom of Crowds
The Wisdom of Crowds: Why the Many Are Smarter Than the Few and How Collective Wisdom Shapes Business, Economies, Societies and Nations, published in 2004, is a book written by James Surowiecki about the aggregation of information in groups, resulting in decisions that, he argues, are often better...
takes a different view of crowd behavior, saying that under certain circumstances, crowds or groups may have better information and make better decisions than even the best informed individual. Robert Bartholomew and Hilary Evans wrote Outbreak! The Encyclopedia of Extraordinary Social Behavior to be like a modern extension of Mackay's work which is more sympathetic to the point of view of participants.
Financier Bernard Baruch
Bernard Baruch
Bernard Mannes Baruch was an American financier, stock-market speculator, statesman, and political consultant. After his success in business, he devoted his time toward advising U.S. Presidents Woodrow Wilson and Franklin D. Roosevelt on economic matters and became a philanthropist.-Early life...
credited the lessons he learned from Extraordinary Popular Delusions and the Madness of Crowds with his decision to sell all his stock ahead of the financial crash of 1929.
Neil Gaiman
Neil Gaiman
Neil Richard Gaiman born 10 November 1960)is an English author of short fiction, novels, comic books, graphic novels, audio theatre and films. His notable works include the comic book series The Sandman and novels Stardust, American Gods, Coraline, and The Graveyard Book...
borrows from the title in an issue of his popular comic series The Sandman, in a story featuring a writer whose novel is titled "...And the Madness of Crowds".
Author and executive coach Marshall Goldsmith
Marshall Goldsmith
Marshall Goldsmith is an American author of management-related literature, professor, executive educator and coach. Born in Valley Station, Kentucky, he received his BS from Rose-Hulman Institute of Technology in 1970, his MBA from Indiana University's Kelley School of Business in 1972 , and his...
discussed the book in depth in BusinessWeek
BusinessWeek
Bloomberg Businessweek, commonly and formerly known as BusinessWeek, is a weekly business magazine published by Bloomberg L.P. It is currently headquartered in New York City.- History :...
, drawing extensive parallels between the financial bubbles Mackay wrote about and financial bubbles today. Other writers also frequently point to the book to explain recent financial bubbles.
Author and journalist Will Self
Will Self
William Woodard "Will" Self is an English novelist and short story writer. His fictional style is known for being satirical, grotesque, and fantastical. He is a prolific commentator on contemporary British life, with regular appearances on Newsnight and Question Time...
writes a column for New Statesman
New Statesman
New Statesman is a British centre-left political and cultural magazine published weekly in London. Founded in 1913, and connected with leading members of the Fabian Society, the magazine reached a circulation peak in the late 1960s....
, 'Madness of Crowds', which Self says takes it title from Mackay's book.
Forbes
Forbes
Forbes is an American publishing and media company. Its flagship publication, the Forbes magazine, is published biweekly. Its primary competitors in the national business magazine category are Fortune, which is also published biweekly, and Business Week...
magazine compared Mackay's descriptions of financial bubbles to the Chinese stock bubble of 2007, claiming that the "emotional feedback loop" that drove the Chinese market was very similar to what Mackay described.
The book was the initial inspiration for Richard Condie
Richard Condie
Richard Condie, RCA is a Canadian animator, film maker and musician living and working in Winnipeg, Manitoba.-Education and career:...
's 1978 National Film Board of Canada
National Film Board of Canada
The National Film Board of Canada is Canada's twelve-time Academy Award-winning public film producer and distributor. An agency of the Government of Canada, the NFB produces and distributes documentary, animation, alternative drama and digital media productions...
animated short John Law and the Mississippi Bubble.
Quotes
- "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."
- "Of all the offspring of Time, Error is the most ancient, and is so old and familiar an acquaintance, that Truth, when discovered, comes upon most of us like an intruder, and meets the intruder's welcome."
- "How flattering to the pride of man to think that the stars on their courses watch over him, and typify, by their movements and aspects, the joys or the sorrows that await him! He, in less proportion to the universe than the all-but invisible insects that feed in myriads on a summer's leaf are to this great globe itself, fondly imagines that eternal worlds were chiefly created to prognosticate his fate."
- "We go out of our course to make ourselves uncomfortable; the cup of life is not bitter enough to our palate, and we distill superfluous poison to put into it, or conjure up hideous things to frighten ourselves at, which would never exist if we did not make them."
See also
- Crowd psychologyCrowd psychologyCrowd psychology is a branch of social psychology. Ordinary people can typically gain direct power by acting collectively. Historically, because large groups of people have been able to bring about dramatic and sudden social change in a manner that bypasses established due process, they have also...
- GroupthinkGroupthinkGroupthink is a psychological phenomenon that occurs within groups of people. It is the mode of thinking that happens when the desire for harmony in a decision-making group overrides a realistic appraisal of alternatives. Group members try to minimize conflict and reach a consensus decision without...
- Irrational exuberance
- Economic bubbleEconomic bubbleAn economic bubble is "trade in high volumes at prices that are considerably at variance with intrinsic values"...
External links
The book is in the public domain and is available online from a number of sources:- Extraordinary Popular Delusions and the Madness of Crowds @ archive.org (PDF or DjVuDjVuDjVu is a computer file format designed primarily to store scanned documents, especially those containing a combination of text, line drawings, and photographs. It uses technologies such as image layer separation of text and background/images, progressive loading, arithmetic coding, and lossy...
format scans) - Memoirs of Extraordinary Popular Delusions and the Madness of Crowds
- Audio Book read by LibroVox volunteers