Extraordinary Popular Delusions and The Madness of Crowds

You can judge this book by its title. It is a classic effort detailing the follies of mass psychology. The author is successful in showing how a crowd of rational thinking people act completely irrationally as trends become popular and people are psyched to believe that they are the gospels of truth. The real life events in this book are the basis for the study of group dynamics and psychology. It is written in great detail, so for those who love studying and learning from history, this is great reference material. It helps understand the prevailing mind set during a mania. When we think of recent historical events in financial markets (Japanese stock market bubble, NASDAQ bubble, Housing mortgage bubble etc.) and investigate the prevailing mind set during these times, it rings a bell. It reminds me of the quote, ”Borrowed enthusiasm makes you a speculator not an investor.”

The believers of the “efficient market hypothesis” condemn Mackay’s material as being exaggerated and mistimed to draw such conclusions. However, I would agree with what the author has tried to prove in this book as historical evidence has more relevance than economic theories.

The readers can also keenly observe how government actions can and have played an instrumental role in fuelling and diffusing the manias and panics. This book will remain as evergreen as it is today even decades later. It enforces the belief that the world can be a very irrational place.

The main areas of focus for me were:
1. The Mississippi Scheme
2. The South Sea Bubble
3. The Tulipomania

Famous quotes from the book:
• "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."

I am writing this review from the departure lounge at Toronto International Airport, as I await my flight to Munich. Prior to my trip to Finland, I chose to read a short book in the hope that I would have it read and reviewed before I left. That did not happen. While I did indeed finish the short 115-page book, it took me three days, and I had no time to compose a review. While I edit this review I am in Munich, awaiting my flight to Helsinki. My habit for arriving notoriously early for my flight, and then having a delayed departure to Helsinki, may see this review go on-line before I get to Finland.

Extraordinary Popular Delusions and the Madness of Crowds: Financial Edition by Charles Mackay was first published in 1841 (without the subtitle). The abbreviated edition I read contained only the chapters in the original work dealing with economics and market psychology, and focussed on three infamous financial manias: John Law's Mississippi Scheme, the South Sea Bubble, and tulipomania. I was drawn to Extraordinary Popular Delusions because of Tulipomania, which I had already read and reviewed for the store..

In both the Mississippi Scheme and the South Sea Bubble, people invested millions in stocks in the promise of reaping huge dividends. In the early eighteenth century, stocks were sold in France for the new trade opened up in Mississippi and Louisiana. At the same time in England, stock was sold in trading prospects in South America. The benefits promised fortunes, and people bought up. John Law, an economist as well as a notorious gambler, led the Mississippi Scheme. He was an irresistible salesmen, who even charmed French nobility:

"When fortunes such as these were gained, it is no wonder that Law should have been almost worshipped by the mercurial population. Never was monarch more flattered than he was. All the small poets and littérateurs of the day poured floods of adulation upon him. According to them, he was the saviour of the country, the tutelary divinity of France; wit was in all his words, goodness in all his looks, and wisdom in all his actions. So great a crowd followed his carriage whenever he went abroad, that the regent sent him a troop of horse as his permanent escort to clear the streets before him."

The Mississippi Scheme, as with the South Sea Bubble, led to outrageous stock prices and sales went through the roof. Schemes were incredible and one wonders how people could be so gullible to invest in a scheme advertised as "carrying on an undertaking of great advantage; but nobody to know what it is." History shows that such prospects cannot continue forever, and whispers murmured that all was not so stable. Some investors cashed out, and I was amused to hear of the cartloads of specie, or coin money, that were withdrawn. No smart investor wanted paper money payments, as coin was considered more tangible than paper money, and could be redeemed by melting it down. Banks soon ran out of specie, and when news started circulating that money had run out, people panicked. It was exciting to read of the rapid downfall of the stock prices. People were left destitute within hours. Stock prices fell so rapidly one was a millionnaire in the morning and a pauper by night.

Mackay only touched upon tulipomania. Ten small pages were devoted to this economic madness while fifty pages were spent on each of the prior schemes.

You can judge this book by its title. It is a classic effort detailing the follies of mass psychology. The author is successful in showing how a crowd of rational thinking people act completely irrationally as trends become popular and people are psyched to believe that they are the gospels of truth. The real life events in this book are the basis for the study of group dynamics and psychology. It is written in great detail, so for those who love studying and learning from history, this is great reference material. It helps understand the prevailing mind set during a mania. When we think of recent historical events in financial markets (Japanese stock market bubble, NASDAQ bubble, Housing mortgage bubble etc.) and investigate the prevailing mind set during these times, it rings a bell. It reminds me of the quote, ”Borrowed enthusiasm makes you a speculator not an investor.”

The believers of the “efficient market hypothesis” condemn Mackay’s material as being exaggerated and mistimed to draw such conclusions. However, I would agree with what the author has tried to prove in this book as historical evidence has more relevance than economic theories.

The readers can also keenly observe how government actions can and have played an instrumental role in fuelling and diffusing the manias and panics. This book will remain as evergreen as it is today even decades later. It enforces the belief that the world can be a very irrational place.

The main areas of focus for me were:
1. The Mississippi Scheme
2. The South Sea Bubble
3. The Tulipomania

Famous quotes from the book:
• "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."

Every age has its peculiar folly; some scheme, project, or fantasy into which it plunges spurred on either by the love of gain, the necessity of excitement, or the mere force of imitation. So says Charles Mackay in this 1841 classic. Its as timely a topic as ever, and the examples he gives sound strangely familiar - people haven't changed. From get rich quick schemes to alchemy to fortune-telling to medical quackery to witch hunts, Mackay catalogs in encyclopedic fashion the great delusions people have long fallen prey to. Most are driven by greed, either to acquire more wealth or to find ways to protect it from others or from circumstance. With our modern media technology, the delusions seem to have more power over the masses than ever. Can I interest you in a ponzi scheme or some wearable magnets that will cure whatever ails you?

You can judge this book by its title. It is a classic effort detailing the follies of mass psychology. The author is successful in showing how a crowd of rational thinking people act completely irrationally as trends become popular and people are psyched to believe that they are the gospels of truth. The real life events in this book are the basis for the study of group dynamics and psychology. It is written in great detail, so for those who love studying and learning from history, this is great reference material. It helps understand the prevailing mind set during a mania. When we think of recent historical events in financial markets (Japanese stock market bubble, NASDAQ bubble, Housing mortgage bubble etc.) and investigate the prevailing mind set during these times, it rings a bell. It reminds me of the quote, ”Borrowed enthusiasm makes you a speculator not an investor.”

The believers of the “efficient market hypothesis” condemn Mackay’s material as being exaggerated and mistimed to draw such conclusions. However, I would agree with what the author has tried to prove in this book as historical evidence has more relevance than economic theories.

The readers can also keenly observe how government actions can and have played an instrumental role in fuelling and diffusing the manias and panics. This book will remain as evergreen as it is today even decades later. It enforces the belief that the world can be a very irrational place.

The main areas of focus for me were:
1. The Mississippi Scheme
2. The South Sea Bubble
3. The Tulipomania

Famous quotes from the book:
• "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."

You can judge this book by its title. It is a classic effort detailing the follies of mass psychology. The author is successful in showing how a crowd of rational thinking people act completely irrationally as trends become popular and people are psyched to believe that they are the gospels of truth. The real life events in this book are the basis for the study of group dynamics and psychology. It is written in great detail, so for those who love studying and learning from history, this is great reference material. It helps understand the prevailing mind set during a mania. When we think of recent historical events in financial markets (Japanese stock market bubble, NASDAQ bubble, Housing mortgage bubble etc.) and investigate the prevailing mind set during these times, it rings a bell. It reminds me of the quote, ”Borrowed enthusiasm makes you a speculator not an investor.”

The believers of the “efficient market hypothesis” condemn Mackay’s material as being exaggerated and mistimed to draw such conclusions. However, I would agree with what the author has tried to prove in this book as historical evidence has more relevance than economic theories.

The readers can also keenly observe how government actions can and have played an instrumental role in fuelling and diffusing the manias and panics. This book will remain as evergreen as it is today even decades later. It enforces the belief that the world can be a very irrational place.

The main areas of focus for me were:
1. The Mississippi Scheme
2. The South Sea Bubble
3. The Tulipomania

Famous quotes from the book:
• "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."

"This is the most important book ever written about crowd psychology and, by extension, about financial markets. A serious student of the markets and even anyone interested in the extremes of human behavior should read this book (Ron Insana, writing for CNBC)."

If Mr. Insana's observation on the rear cover of this compendium of Charles Mackay's and Joseph de la Vega's treatises sounds like a bit of hyperbole, well...Mr. Insana writes for CNBC.

I haven't read enough primary literature on crowd psychology to know whether "(t)his is the most important book ever written" on that subject. That doesn't really matter. The fact is, it's a damned good book, an easy read of 4-5 hours, and a bit of history one never gets in school. Well, maybe in the Business Schools of Harvard, Wharton or Columbia.

A shame that no one's ever made a movie on the subject of John Law and the "Mississippi Madness" of 1719-1720. Perhaps the French are just a tad embarrassed by this bit of their history. Ditto for the Brits and the "South-Sea Bubble," which followed almost immediately thereafter. And let's not omit the Dutch and their "Tulipomania" of 1635-1636. All three events are covered not only adequately and sufficiently, but amusingly, in Charles Mackay's treatise.

Joseph de la Vega's treatise, CONFUSIóN DE CONFUSIONES, on the psychology and behavior of brokers in Amsterdam's first stock exchange is, of course, a horse of a somewhat different color. Rather than straight exposition, he penned CONFUSIóN DE CONFUSIONES in dialogue form and first published it, in Spanish, in 1688. Although I've spent only limited time on Wall Street or in the company of stock brokers, one might assume that de la Vega's descriptions are as accurate today as they were 325 years ago. And yes: anyone contemplating a job in the financial services industry -- as well as anyone contemplating so much as dinner with a stock broker--should read both treaties. It would be a small investment in time and money -- and might save you a lifetime of frustration and disillusionment.

Quite by coincidence, my reading of EXTRAORDINARY POPULAR DELUSIONS AND THE MADNESS OF CROWDS and CONFUSIóN DE CONFUSIONES coincides with my viewing of "Margin Call"--an excellent film on a related subject. And my own professional career, which survived the one-day drop of over 500 points in the Dow Jones in 1987, but not the dot-com crash of 2000, is a small testament to market madness and the delusions of crowds. As they say in both Predicate and Quantitative Logic, Q.E.D. (quod erat demonstrandum).

RRB
08/29/13
Brooklyn, NY

Ars Longa, Via Brevis

The cover of the copy of this book I read says "If you read no more of this book than the first hundred pages -on money mania- it will be worth many times its purchase." This may be, I'd say it would be worth about what it cost. The rest of the book is a rather longwinded and rambling collection of miscellanea designed to remind the supercillious Victorian how wonderfully clever he was. There are definitely some interesting stories hiding in the dross but not really worth 700 pages of my time. Also, the author creates a real Alchemist Hall of Fame but I was pretty surprised at the omission of the most noteworthy enthusiast of that art, Sir Isaac. Indeed, the alchemists were portrayed as pretty much exclusively wasting their time and not much sympathy was allowed for the fact that this old hobby really did some good things for metallurgy and practical chemistry in general.

Most people, however, hear about this book in the context of insane financial manias. In that section, which really could stand alone as a separate book, the stories were quite interesting as they parallel events that have unfolded in the last ten years with uncanny fidelity.

I was worried when I read on the first page that one of this author's other fine works was a book called "The Thames and Its Tributaries". Whoa! Fun! And this book definitely had a bit of that kind of excitement level for large chunks of it. Worth reading the beginning or perhaps just as well, the Wikipedia articles on the following topics: Mississippi Company, South Sea Company, and Tulip Mania.

Extraordinary Popular Delusions and The Madness of Crowds was first published in 1841. The subjects debunked by Mackay include the Mississippi Scheme, the South-Sea Bubble, Tulipomania, alchemy, modern prophecies, fortune-tellers, magnetisers, influence of politics and religion on the hair and beard, the Crusades, witch mania, murder through poisoning, haunted houses, popular follies of great cities, popular admiration of great thieves, duels & ordeals, and relics.

My version is 742 pages and 16 chapters (this version is only 410 pages so most of the chapters have been pared down). Despite the book's legacy I quickly realized how wordy and rambling it was and I must admit I was expecting much more from this classic title. Many people read this book to learn about stock market history (the first 100 pages or so) yet that is the weakest section of the book since those stories have been told too many times in investment literature. The best parts talk about the Crusades, Magnetizers and Alchemists. The worst parts are the Mississippi scheme, South Sea bubble and tulipmania because MacKay gives you too many details to make his point. You are better off reading about stock market follies elsewhere. Amazingly, there are editions of this book that only contain the economic sections so be careful which version you buy. Some chapters are great while others move along at a snail's pace and are very repetitive. The Crusades chapter is my favorite and something of a tear-jerker. If you don't want your illusions about people or history in general to be torn down you might want to give this book a pass. The scholarship is fairly good throughout but leans toward the sensational at times. Insights and analysis from MacKay are lacking as he functions mostly as a narrative editor who is content to simply list the follies of crowd behavior.

This is still a classic book but it hasn't aged particularly well and could use a thorough edit. MacKay ultimately blames people for their own mistakes. He points out that no one ever looks at their own bad judgment but rather they look for others to blame. Crowds are responsible for giving these bubbles life and keeping them going. It is much easier to blame governments or corporations. Perhaps we cannot help ourselves and are doomed to repeat the mistakes of the past. I'm not disagreeing with the message but the author has more than made his point here. It almost seems he could say more but the book is content to list off numerous mistakes throughout history so you can see the pattern. MacKay mostly relates the events of history but doesn't mind slapping down many people (sometimes quite unfairly). If you build a bubble up MacKay is going to throw the baby out with the bathwater. Not completely fair and a little harsh. Some men, such as Dr. Franz Mesmer, who discovered techniques that led to the application of hypnosis in medical settings are treated like complete crackpots. Not everyone covered here is mad. Perhaps too enthusiastic and wrong in their execution but not necessarily mean-spirited and fraudulent.

Financial writer Michael Lewis 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. However, if you have done any reading on economic bubbles (Mississippi scheme, South Sea bubble, tulipmania, etc.) this text won't add much. Beware which version you pick up because I cannot vouch for an abridged edition despite the length of the original book. Many of the topics do make for very interesting reading. For an intro to investing, check out the works of David Bach (e.g. Smart Women Finish Rich). For advanced investing, see the Intelligent Investor by Benjamin Graham. This book has managed to hold its value remarkably well since it was written in 1841. Overall, it is a worthwhile but unbalanced read about the madness of crowds.

This Kindle edition consists of the first of three long volumes, published in 1852. It details various mass delusions and obsessions, varying from hair styles to the crusades to financial crises to the burning of witches - and much more.

I enjoyed this book immensely, despite its length, but found it to be unsettling. The details of each of the many events covered are different, but there is an underlying theme that should be a warning to modern man. The author points out that the madness that periodically breaks out among the masses would, hopefully, be less in the future. If only he knew that these follies would continue up to the present day.

Each of the events he described had the same pattern:

Firstly, some individual or small circle of individuals would make a claim. The purpose could be profit, vengeance, or superstition.

Secondly, some larger segment of society (such as the Church, stock jobbers, etc.) would proclaim a societal emergency or, even, a great opportunity.

Thirdly, the masses would adopt, unquestioningly and illogically, the truth of the original claim, often twisting the claim in a manner the originators would not have imagined or possibly approved.

Fourthly, more reasonable men or organizations would be shunned or punished as heretics for failing to accept the popular delusion.

Lastly, the folly would become so reprehensible or unsustainable that it would fade away, only (regrettably) to be replaced by another.

In our times, we consider ourselves modern and rational. Many readers might look on the examples described in this book to be so absurd as to irrelevant to our times. However, our follies follow the same pattern - sometimes more subtle but often just as costly and often more deadly.

I am old enough to remember the great DDT scare. DDT was considered to be the greatest possible threat to mankind, even causing birds to lay thin-shelled eggs that would lead to the extinction of entire species. Those who pointed out the absurdity of these assertions were called "cranks" or worse. No public official or academic dared to challenge the mass appeal of junk science. As a result, deaths from malaria (which due to DDT had been almost eliminated) skyrocketed to millions per year - mostly little brown or black children for whom the Western masses had little concern. And the original claims are now known to be incorrect.

Or the great ozone hole hoax. Since the late 1800s scientists have known that the ozone hole opens and closes in sync with the 11-year sunspot cycle. However, they were cursed and ignored. The mass delirium resulted in many useful products being banned or replaced with less efficient and more costly substitutes. When the hole closed and we did not all die of skin cancer, these regulations were considered the proximate cause and remain in place.

I served as an elected official for a major water agency when the big scare was carcinogens. Great quantities of different chemicals were fed to rats. Those that allegedly caused cancer were banned, even though critics pointed out that great masses of chemicals can cause cancer when small amounts would not. Of course, these critics were decried and abused. When we were forced to spend a billion dollars to remove the last miniscule traces of carcinogens from the water supply, we tried to point out to the environmental agencies that carcinogens occur naturally, especially as defensive mechanisms in plants. In fact, if one were to drink 50 gallons of water per day for his entire life, he would have consumed fewer carcinogens than occur in a level teaspoon of peanut butter.

I could go on with many other current delusions (such as global warming or electric automobiles that allegedly defy Newton's laws by using no energy!). By definitions, mass delusions are accepted in their time by almost all people - people who consider themselves rational and caring. Reading this book will, perhaps, reduce the numbers of the deluded

"Extraordinary Popular Delusions and the Madness of Crowds" and "Confusion de Confusiones" are both works that address speculation frenzy in early financial markets but which have continued to enjoy a surprising popularity among investors centuries after they were written. Perhaps that is because a certain romanticism and distance comes with age, while at the same time these stories of speculative bubbles tell us that nothing really changes in the markets no matter how sophisticated we get. A foreword by Peter Bernstein sets the stage for the 17th century proliferation of financial instruments and pursuit of wealth. Martin S. Fridson's Introduction comments on the enduring popularity of these works, their differing perspectives on market forces, and their debunkers.

"Extraordinary Popular Delusions and the Madness of Crowds" was authored by Scotsman Charles MacKay in 1841. It was a favorite book of Bernard Baruch, who wrote the foreword to the 1932 edition, a much longer work than what we see here. Only chapters relating to financial markets have been included in this Wiley Investment Classics edition. MacKay recounts three speculation frenzies and their aftermaths: The 1717 Mississippi Company of John Law and France's misadventures with paper money under the regent Duc d'Orleans, the 1711 South Sea Company bubble, and, more briefly, the "tulipmania" that overtook Holland in the 1630s. MacKay concentrates on the human behavior that drove these bubbles rather than on financial minutiae. If you're interested in learning more about John Law, father of modern finance, Millionaire by Janet Gleeson is a very readable biography.

"Confusion de Confusiones" author Joseph de la Vega wrote about what he knew personally: the stock market in late-17th century Amsterdam. The 1957 introduction by Hermann Kellenbenz includes a bio of de la Vega and helpful explanations of the types of transactions to which the work refers. The main text is a series of Dialogues between a Shareholder, a Philosopher, and a Merchant, in which the Shareholder explains the stock market, which he describes as "this enigmatic business which is at once the finest and most deceitful in Europe", the "quintessence of academic learning and a paragon of fraudulence." De la Vega uses stock of the Dutch East India Company as an example and lays the blame for price instability on syndicates of bears and bulls who conspire to move prices. I can't say that either of these works is useful -we have plenty of bubbles in our own time, after all- but they are engaging curiosities.

This is a true favorite of mine, and I just wanted to make a quick plug for it. Let me just mention that I am not usually attracted so strongly to books from the 1800s written by Englishmen. In this case, I was thrilled to see it was in fact from that time.

Mr. Charles Mackay is telling the stories of several of the more absurd moments in Western history. I think that for an Englishman to do this in the time in which he was living, well, called for an unusual character, and desire to expose the truth. I believe that Mr. Mackay was historically accurate in the episodes he was chronicling, and in my reading I have had a few confirmations of his accuracy from other sources.

In my recollection, there were richly detailed chapters dedicated to the follies concerning alchemy, witchcraft, witch burnings and persecutions, financial follies, the Crusades, and the "New Age" follies of his own time (The term "New Age" as most folks know it now was coined in Mr. Mackay's time here in the USA, although I have that from another source.)

Perhaps most enlightening or alarming, for those who don't know, is his histories of the witch burnings of Europe, England and America. It might put one the persecutions and mass murders of Jews in Europe in the 1940's, of Budhists in Tibet now, of Joseph Stalin's butchery, or of the American persecution and killing of its own aboriginals, in a more realistic light.

The chapter dedicated to the Crusades I would recommend for anybody wanting a bit more background for the how and why's of our Middle East war. I wouldn't leave it at that though, and would recommend a book or two by Karen Armstrong as well, or instead if that is your main interest.

His interest in massive financial scams and market hysteria taking place in the 18th and 19th Centuries was particularly enlightening. It is both reassuring and humbling to know that our American S&L scams and the latest stock market frauds are nothing new. Very humorous and educational.

Mr. Mackay, all in all, exposes some of the truths we were seldom encouraged to see in our school days, and to me is one of many heroes of healthy skepticism and critical thinking, and a guard against blindly following the crowd. The book is also an argument towards humility, reminding us that so many who have done terrible wrongs, were certain they were doing God's work.

Not the most cheery reading, but for anybody who has even once suspected we are living in a fiction, and the truth is "out there" somewhere; you will find relief here. Surely everybody in America has felt that at one time or another.

While this book is somewhat difficult reading, being written in Dickensian Olde English (and you certainly don't have to read all of it to get the point) it should be required reading for every college student. Enron employees, who sunk their entire life savings' into one stock, would've also benefited from a thorough reading of this. Luckily, if you're young and you haven't read this yet, you don't have to join the ranks of the 401k-less ninnies who bought into all the hype of the late nineties.
If you are like most of us, you probably had a cube-mate who fashioned him/herself as a "Wall Street wizard" at some point in 1998; you probably had a good laugh as you watched an E*Trade commercial from around that era where the TV-addled couch potato chooses his stock picks based on what's being marketed to him on TV. Personally, I recall one example where a co-worker invested the entire contents of his children's college fund on a single stock purchase, bragging about his profits from said transaction to everyone! Never mind the fact that he could have very well left Johnny and Jenny putting themselves through the local community college and living at home; this was 1998, after all - the "New Economy" was going to transcend all of the limits that 'unprogressive' thinkers had ascribed to all earlier versions of the economy. The question is: are you going to believe the mucky-muck hack/establishment economist at _Barron's_, or learn lessons from history? This book is for those who prefer the latter.
This book is really a classic in critical thinking. Having read this around age 19, I couldn't help but think that the "New Economy" was mostly a bunch of balderdash and that nothing can permanently transcend fundamental economic principles. In fact, the .com boom - undoubtedly epitomized by this very bookstore, (which at one time was worth about eight times the GNP of Norway - at least on paper), is far from the first example of various manias that have swept through the popular mind in the last few centuries.
This book (or at least the chapter on Dutch tulip mania) should be required reading for everyone who thinks that they are going to take a weekend seminar and get a _Wall Street Journal_ subscription and somehow "beat the market." Anyone can learn how to read bar charts and the like, but this will teach you something much more important: human psychology. When you understand generally recurring historical patterns, you'll understand a lot. Perhaps it's at least refreshing to know that the silliness of the .com boom isn't without historical precedent.
Also recommended: "The Alchemy of Finance" by George Soros (for those who think that the market "must always go back up", even as they are oblivious to say, the fact that businesses are eventually judged by their liquid worth at some point) and "The Crowd" by Gustave le Bon, another book on mass psychology written in an entertaining style.

This is a famed work. The reprint comes with a forward by Bernard Baruch.
John Law was born in 1671. At the zenith of Law's prosperity the highest and lowest classes of Paris were alike filled with a vision of boundless wealth through the buying and selling of stock. An unworthy avarice had infected the whole society.
While confidence lasted there was an impetus to trade. The system flourished until 1720. The higher the price of Indian and Mississippi stock, the more bank notes were issued. Precious metals were conveyed to Holland and England.
In February 1720 an edict was published which contrary to intent destroyed the credit of paper currency. The edict sought to forbid the amassing of coin, jewelry, plate, and precious stones. The value of the shares in the Mississippi and Louisiana stock fell rapidly.
The regent installed an ex-chancellor to aid in the restoration of credit. On June first the old law was abolished and everyone was permitted to possess as much specie as he or she pleased. New notes were printed and the old ones withdrawn.
Law was in physical danger and had to take refuge in the apartments of the regent. In one instance his coachman was attacked by a mob. The nation awakened to its folly.
The prince granted Law permission to withdraws from Paris and leave the country. He traveled to Brussels and Venice. He had invested all of his gains in landed property in France. After his departure his estates and personal property were confiscated.
The regent died in 1723. Law was reduced to his former life of gambling. He died in 1729 in Venice in embarassed circumstances.
The South Sea Bubble originated in 1711. There was an idea there were immense riches on the eastern coast of South America. At the time of the South Sea Bubble the term for any joint stock company came to be known as a bubble. The author compiled a list of 86 undertakings, bubbles.
During the progress of the famous bubble England presented a singular spectacle. The hope of boundless wealth made people heedless and extravagant. In the aftermath public meetings were held to condemn the directors. No one blamed the credulity and avarice of the people.
Parliament was not more reasonable. Sir John Blunt was the most active manager of the South Sea Company. He was questioned by the House of Commons and the House of Lords. After a session before the latter he expired suddenly. The fatal result was not anticipated.
After the punishment of the directors, the legislature had to consider how to restore public credit. In times of great commercial prosperity there is a tendancy toward over-speculation. Until 1634 the tulip annually increased in reputation. The book gives the amusing story of the tulip craze where special exchanges were created to facititate trade in the bulbs.
Albertus Magnus and his student, Thomas Aquinas, were considered men who could work wonders in alchemy. Paracelsus was born near Zurich in 1493. John Dee was born in London in 1527. His assistant was Edward Kelly. A book about John Dee and the spirits was published by Dr. Meric Casaubon. Robert Fludd was the father of the English Rosicrucians. He was born in 1574 in Kent.
Cagliostro born in Palermo in 1743 was the archquack of his age. In Paris he was involved in the affair of the queen's necklace. The career of Anton Mesmer is recounted. Each age has its particular folly. One of the follies was the Crusades.
The belief that disembodied spirits may be permitted to revisit this world gave rise to the witch mania. The early annals of France abound with instances of supposed sorcery. Matthew Hopkins was a famous witch finder. In Scotland and England the delusion was gradually extinguished. The horse shoe, the grand preservative against witchcraft, was nailed againt the door.
The book comes supplied with an index. One is left with a very curious view of human nature.

The thrust of this classic can be summed up in a single quote. The English South Seas bubble took direct inspiration from John Law's Mississippi scheme; though Law crashed and burned, the Seven Seas directors fancied themselves smarter:

"Wise in their own conceit, they imagined they could avoid his faults, carry on their schemes for ever, and stretch the cord of credit to its extremest tension, without causing it to snap asunder."

And so goes most every bubble to this day, as bankers, politicians and the investing public continue to fancy themselves smarter than their kind of yesteryear. Mackay's revered tome is as much an endorsement of Austrian Economics as it is a documentation of mob psychology. The boom and bust cycle is fueled by easy credit, let loose in hopes of keeping the party going. As the velocity of money increases, ever more disjointed arguments are trotted out to justify ever higher valuations. The frenzy intensifies to a point of unsustainability, the true believers falter, and then it all comes crashing back to earth again.

Mackay also touches on the nature of bubbles as a wealth transfer mechanism from the many to the few. As in all bubbles, a handful of individuals walk away with dubious fortunes intact, leaving the scene (and often the country!) before the tide turns.

Simple observation shows why the public must always lose: if a bubble is based on credit and speculation rather than real productivity and real gains, the excess valuations are not supported by any sustainable means, and the temporary wealth effect is actually just a crowd of people sending inflated sums back and forth. Like musical chairs, the only way to win this game is to stop playing before everyone else does.

There is another amusing aspect to the book: the attempt of some pointy-headed academics to prove Mackay's bubbles justified, i.e. to say that fundamentals asupported the valuations. This incredible stretch seems more herculean than attempts to maintain respectability for the flat earth society.

Whether or not a tulip bulb's DNA is sufficiently rare, regardless of the South Sea company's genuine trade prospects, only an ivory tower academic could be so willfully obtuse as to dismiss the sheer frenzy of the times. During the South Seas bubble--which touched off a number of lesser speculative schemes--a small fortune was collected (and spirited from the country) on the strength of the following prospectus: "a company for carrying on an undertaking of great advantage, but nobody to know what it is." (Does that ring a dot com bell or what?)

It's easy to look back and think, "How could those people be so stupid? Surely we couldn't be that stupid today?" But stupidity is not necessary for the inflating of a bubble. All you need is a positive situation with compelling fundamentals (and even the fundamentals are optional, if you have conditions that create an illusion of their existence).

If the fundamentals justify rational valuation R, then the bubble inflates as multiples are notched up to R x (HC / P), where H = hype, C = credit flows and P = prudence. As greed kicks in, a good story morphs into a fairy tale, rationalizations abound, and prudence goes on vacation. The hand is inevitably overplayed. Easy credit fuels the fire as investors play ring around the rosie. Eventually they all fall down.

Chances are, bubbles will always be with us; the necessary conditions for their forming are rooted in the human condition. New innovations and new growth stories--biotech, the rise of Asia, demographic shifts etcetera--will change the world in the long run while inspiring cyclical frenzy in the short run. The willingness of bankers, politicians and Wall Streeters to provide easy money is perhaps at a high point in history, and the public, as always, shows a remarkable lack of restraint with no sign of wising up. Game on.

Charles MacKay's Old English treatise on how seemingly rational individuals somehow manage to turn into totally irrational crowds is a maddenly fascinating piece of work. It's safe to say mankind hasn't progressed all that much in dealing with hype & hysteria since this was first published in the 1840s.

From Hitler mania in Nazi Germany to the perplexing disco fever in the '70s, society---or certain segments of society---continues to behave in strange & most bewildering ways; and I suppose it always will.

The conclusion I've drawn from all this is, people are easily drawn to beliefs or ideologies based on momentum. Momentum pays little or no attention to common sense or justice. It's fueled by human beings' inate desire to do what everybody else seems to be doing. This phenomenom is frequently called the "Bandwagon effect"; and once this wagon gets rolling, it's hard to stop.

Trying to understand the madness is a difficult task; usually, it's best performed after the movement or fad has ceased to exist. Hindsight will always be 20-20; those who are able to anticipate our delusional behavior before the fun begins will stand a chance of thriving in society better than the average lemming.

Extraordinary Popular Delusions and the Madness of Crowds has been a favorite of mine for years, so while I'm happy to see it popularized, there's so much I miss! This is the first book of Urban Legends. There's so much to the book, and so much is so funny, and the financial stuff is the driest part of the book.
That said, I understand Fridson has a theme, and by using these two old works, one Victorian, and one Louis XIV, he shows that nothing much changes: people will do very stupid things if that's what everyone else is doing. More to the point, people will do very risky things with their money, if everyone else is doing so. Examples abound in these two great books, and Fridson doesn't miss a chance to make a point, and usually gets a good laugh in as well.
Tulipomania (when the price of tulip bulbs in Holland inflated beyond the ridiculous) is especially revealing, and though Fridson is using it to make a point about price inflation, I couldn't help thinking also about the marketing technique by which the public is convinced it needs something, then that something is doled out like Oreos to a diabetic. I'm thinking specifically of diamonds, but there are lots of examples.
Fridson pulls this altogether, and as big a fan as I am of Extraordinary Popular Delusions and the Madness of Crowds, the original work he has created by mating a part of it with the other work, and with his own explanatory text is a great book.
I am not an investor, and generally find economics petrifyingly boring, but this book was a fun romp. Even if you have no interest in finance, read this book just to have a good laugh at our species.

The stories in this book will have appeal as long as human beings exhibit great greed and fear in their investing. Those traits will encourage people to manipulate those emotions to their advantage, and these tales will recur with new investments every few years or so. Some few winners will garner long-term wealth while most will lose their seats in this game of financial musical chairs . . . known as speculating in endless opportunity. Fast success draws attention, which draws new investors, which creates more fast success. The price takes off like a rocket ship to eventually crash to earth when it runs out of the fuel of optimism and greed.
No one can hope to be a successful investor without absorbing the stories of these timeless follies.
You will find in this book three sections from Extraordinary Popular Delusions and the Madness of Crowds by Charles Mackay in 1841, and Confusion de Confusion by Joseph de la Vega from 1680. The Mackay material describes the almost simultaneous Mississippi Scheme in France and the South Sea Bubble in England, as well as the earlier speculation in tulips in the Netherlands. Confusion de Confusion is a translation from the Spanish about speculation in Amersterdam in the securities of the Dutch East and West India Companies.
The Mississippi scheme involved the use of private bank notes to improve the French debt and currency that were eventually tied into investments in a colony in Mississippi. John Law, a Scotsman, was the originator of the scheme, which grew out of control when the French printed too much money and the Mississippi colony foundered. You can read more about this in the recent book, The Millionaire. The basic facts are more easily absorbed, however, in this volume. Following along shortly thereafter, the English began to speculate in stock in a monopoly to develop trade with the Spanish, also tied to reducing public debt. That became the South Sea bubble and the speculation was encouraged by the early success of stock investors in the Mississippi scheme in France. Tulipomania is considered the best of the financial parts of this book, and recounts the amazing heights that a single tulip bulb could bring (with a famous table of the buying power of a florin at thta time) and the problems encountered, such as when a sailor mistook a rare bulb for an onion and had it for his lunch! These three essays are about psychology, and do not go into the market details too much. The descriptions about how the government dealt with these disasters provide relevant information for regulators.
In Confusion de Confusion, there are four dialogues about how bull and bear markets can be manipulated and the consequences, in the context of speculation in hopes of gain for the new colonies and trade. These dialogues are superb examinations of how markets actually work, and will be an illumination to the new investor of who she or he may be up against. The lesson: Be sure you know the rules and think about how they could be used against you.
This book is greatly improved by a series of essays. One is by Peter L. Bernstein in which he makes comparisons of the current markets to these early essays. Herman Kellenberg's introduction explains many of the details of the Amsterdam markets very well to make the de la Vega material more accessible. I especially liked the introduction by Martin S. Fridson in which he points out some of the errors and hyperbole in the Mackay material, and puts that work into a current context. Without these essays, I would simply encourage you to seek out the originals instead of this book. But these modern essays will add a great deal to your understanding.
Mackay's book was reportedly a favorite of Bernard Baruch's, which has helped its popularity enormously over the last 70 years. After you read this book, I do recommend that you read the entire book. Although it is a tough slog in places, you will come away with a much better understanding of crowd psychology than these three sections alone will give you.
The fundamental mechanism for each of these mania is that a new investment opportunity arises that seems to offer great potential. No one is quite sure what the future will hold, and optimism takes over. The price starts to rise, and that attracts attention. As more people invest, the market rises more. That draws more attention and investors. This continues until either pessimism starts to balance excess optimism, or the market simply runs out of new investors. It takes ever more money to create the same growth, so the market eventually has to fall. Along the way, a few are smart and take out their money. The rest lose.
This mechanism occurs about once a decade. Some of the recent examples are Internet stocks in the 90s, biotechnology stocks in the 80s, the Nifty Fifty in the 70s, the conglomerates in the 60s, electronics companies in the 50s, radio companies in the 20s, utility trusts around 1900, railroads in the 1880s, and so forth back in time. The key lesson: If you think a mania will form, do your buying and selling very early in the game or ignore the game altogether and go into safe securities. Either one will work. If you want to split your money in half with half for speculation and half for safety, that would give you the best and safest route. Most people do not have the emotional discipline to sell in time, so it is dangerous to play. The markets will fall many times faster than they rose, so the time to escape is on the way up.
I hope you will buy and read this book, and share it with your children when they start to invest.
When you are done with the book, I also hope you will also consider where else mania take over. These occur in consumption patterns (not unlike tulip bulbs), activities (remember disco?), businesses (franchised door-to-door selling), and entertainment (quiz shows will come and go many times). Be sure you watch out for your exposure to these mania as well. Avoiding wastes of time and resources are an important part of achieving true growth.

I wanted to read this book to learn more about our current financial crisis. And I learned that if you think that the current financial crisis is an extraordinary event and our government will place proper regulations to prevent this from happening again, then you can keep on dreaming, or read this book instead. You will learn that manias such as what we experienced in the housing market and during the internet bubble are nothing new.

In this book, the author takes readers through the history all types of manias such as The Mississippi Scheme, The South Sea Bubble, and The Tulipomania. I found it amazing that we are no different from people 300 years ago. We are greedy and irrational and looking for quick ways to get rich. And unfortunately, we do not learn very well from history. This book is fabulous and I found it very interesting.

- Mariusz Skonieczny, author of Why Are We So Clueless about the Stock Market? Learn how to invest your money, how to pick stocks, and how to make money in the stock market

This is it. If you want to know how many times the world has been gripped by madness then look no farther than the reprinted edition of MacKay's classic. Written in that wonderful Olde English style of the early 19th century, MacKay takes us on a tour of the world's most horrifying manias - up to about 1840 anyway.

I particularly liked the chapter on witchcraft and witch hunts since it told me everything I'll ever need to know on why seemingly intelligent groups of people band together to banish or murder innocent members of society - just because they are different. Another engaging chapter deals with millennialism - the fear and dread that grips society at the end of each millennium. If you thought the end of the last one brought turbulence, you should read what happened a thousand years ago.

This book is often quoted by stock market pundits and talking heads as if it were a treatise on irrational behaviour in the financial markets. It isn't. It deals with irrational behaviour and mass stupidity in all walks of life. Five Stars.

It's the oldest book I know of that exposes and explores our human capacity to delude ourselves and others, and how mass hysteria can shape history and the world we live in. It's very entertaining! But more than that, it led me on a journey that I continue today, of applying critical thinking to all aspects of modern life as well as my own personal life.

We can fool ourselves so easily! Even without the help of Fox News and blowhard politicians to guide us into idiocy. If MacKay was to write about today's world, he'd make us laugh about the Birthers, 911 Truthers, global warming deniers, anti-vaxxers, and anti-GMOers.

The truth is out there, but it isn't found in the X-Files. You have to make the effort to dig for the facts and apply knowledge and reason to them. This book gives you important clues how to do it.

If you are a stock market investor, than this book must appear as one of your top 10 books to read. Investors really have no choice but to read this book because unlike any book you will ever read, this book teaches you about the CROWD. What motivates the crowd, and what causes people to join the crowd. If you were to ask any of the famous investors you have read about, every one of them is aware of the importance of CROWD PSYCHOLOGY. Warren Buffett has always talked about Mr. Market, which he learned from Benjamin Graham.

Now having said this let me tell you quickly what this book is about. MacKay in a brilliant, and in an interesting manner takes you through 700 pages of mass buying panics from centuries ago. These include The Witch Mania (100 pages) in the 15th and 16th century. The Crusades (100 pages), Alchemy (160 pages), and the Poisoners- hey, poisoning people was a big thing centuries ago- remember Napoleon.

The big buying binge that most people recognize is the South Sea Tulip Craze, where the participants bid up the price of tulips, yes tulips to the equivalent cost of houses and more. We're not done, MacKay goes through many, many more crazes, panics, and buying binges. All of these stories involve the CROWD. Extraordinary Popular Delusions... has survived the test of time. We do not know if anything being written today, or any studies being researched currently will be able to stand the time test? We only know that MacKay's book has.

Is the book interesting?

Yes it's fascinating, but you have to be interested in this subject. If you are in the financial markets you have no to STUDY, NOT READ this book. I say this because I have been a money manager and history buff for 35 years. If I did not live through the modern equivalent of MacKay's book, frankly I wouldn't believe half the stuff that is in this book, which is presented as truth.

The reality is I have seen MacKay's explanations work out in my own lifetime, and so have you. A few 20th century equivalents are in order:

1) INTERNET STOCK MAREKT CRAZE: 1999 - 2000

Wow, I did an analysis of the market value, of a major Internet stock in play at the time of the craze. The stock was representative of hundreds of other companies participating in the run-up in value. One day, I discovered that this Internet stock's market value was the equivalent of ten major corporations combined. These companies included IBM, GM, Ford, Chrysler, Electronic Data Processing, JC Penny, Sears, and others, all combined. It couldn't be. Did I calculate wrong? It was true, and the number was getting bigger every day.

Over $1.4 trillion dollars had been committed to Internet stocks by some of the smartest savviest people in the world. When it was over, that $1.4 trillion was reduced to under $100 billion. Over 90 plus percent of the value had simply disappeared. This was Extraordinary Popular Delusions all over again, and you lived through it too.

2) Personal Note: During the Internet Craze, I was re-tooling by taking courses at Harvard University. Every five years, I try to do this. I would drive up once a week and spend eight hours in financial classes with some of America's truly outstanding teaching professors to see what's new in academia that hasn't hit the money management industry yet. These world-renowned professors all got swept into the Internet stock market craze. They personally lost substantial pieces of their net worth. Every one of them was claiming that we were in a new age. They were throwing out their financial training out the window.

These were Professors who had read every page of MacKay's book, underlined it, annotated it, and even memorized sections. This is what you need to know. The first words that come out of a person's mouth involved in mass hysteria are - THIS TIME IT WILL BE DIFFERENT. It's a dead giveaway that we are in a POPULAR DELUSION.

3) The American Invasion of Iraq: Forget whether the President was right or wrong. Every intelligence agency in the world believed that the Iraqi's had weapons of mass destruction. David Kay, perhaps the smartest man in government believed it. This again, is an example of the crowd psychology in action.

4) Bay of Pigs invasion of Cuba- President Kennedy as smart a man as they come got swept up into the crowd psychology believing along with everyone else that 1500 poorly trained Cubans could land on a beach in Cuba, and then suddenly without support, walk their way into Havana picking up ordinary people on the countryside who would swell their ranks and allow these expatriates to overthrow the Castro regime. These were the smartest men in government that believed this.

The list goes on and on, and if you the reader live long enough, you will see yourself swept up in these instances of mass hysteria. If two Presidents of the United States can get caught up in crowd psychology, we all better be on the lookout for it. Good luck.

Richard Stoyeck

I read a lot of history books and I am a big fan of books dealing with the history of science and economics. Yet, I could not bring myself to finish this gargantuan book. Before you buy this book be aware that it was written in 1841, and in my opinion it did not age very well. If you are a casual reader of history books, this book is probably not for you.
Of the book's 740 pages, the first 100 or so deal with economic bubbles - these initial chapters are relatively engaging and easy to read. In comparison, the following 150 page are simply a LIST of famous alchemists, with a few brief anecdotes about each one. The other subjects covered later on, prophecies, fortunes telling etc. suffer from the same problem. The book contains no analysis, it merely offers a collection of anecdotes, some amusing some not.
The book is written in archaic language, with Latin and French phrases interspersed throughout it. Occasionally, entire Latin paragraphs are used with no English translation. I read a lot, and this is the first book in many years that I was not able to finish.
There is one positive thing I can say about this book: it is a fascinating example of 19th century writing. The approach to the subject matter, the narrative tone and the language used were very instructive and interesting for me. Nevertheless, I was only able to make it to page 323 before giving up. For the casual reader I would suggest more modern books on the topics covered. For example: Tulipomania by Mike Dash is a great book about the Tulip trade Bubble of 1636.

The author tracks historical mass-mistakes with such clarity that it is easy to see the parallels with the world of today.
As has been noted in other reviews, the current stock market overinflation and collectibles craze are clearly paralleled by previous events. A parallel which I haven't seen in other reviews here is the current 'alien invasion/x-files' obsession with the long running belief in alchemy. The same figures play roles.. the naive believer and the swindling fraud, most prominently.
Our current astrology revival is only the latest wave of belief in this ancient 'art' and homeopathy has much in common with 'animal magnetism.'
I think that every young person, every person should read it to gain an appreciation of the tools we have to sort out the sense from the nonsense as well as a historical perspective on how much human nature has not changed in its eagerness to believe in the face of reason.

This book is about +700 pages, but feels way longer. It describes several different manias and delusions that appeared through mankind's history. Analyzing them in retrospective, one can see that they were irrational - madness. While reading this book, you can't help but think about many common beliefs of the current times, wondering if those are delusions too.

However, this book tells similar stories time and time again. They provide anecdotal evidence, but at some point you get just tired of reading them. About 400 pages would be right, +700 is just too long.

Extraordinary Popular Delusions & the Madness of Crowds, by Charles Mackay

Although originally published in 1841, the subjects covered: manias, financial bubbles, runaway enthusiasm, mass disillusion and wildly optimistic projections and forecasts are as relevant today as the times they were written about. The underlying thought process that led markets to unjustifiable heights hundreds of years ago are still very much intact today.

I can't get enough of, Tulipomainia and The South Sea Bubble. I read this book in 1990 when I was starting my Wall St. career and have never forgotten those tulip bulbs and how the Dutch ran the price of them to the stratosphere. In 1635 people paid as much as 100,000 florins for up to 40 bulbs. To put this in perspective, four fat oxen sold for 480 florins and four tuns of beer was 32 florins.

The first 3 chapters are a must read for anyone who has anything to do with finance.

By Kevin Kingston, author of: A 20,000% Gain in Real Estate

My Blog:

The Real Estate Investors Blog

At Bloglines

bloglines.com/blog/KevinKingston

Mackay's catalogue of the human comedy,aside from the 1840 language,reads like any litany of contemporary idiocy.The book is long and sometimes dry,but the human,all too human desire to see our fellow mortals in their ignorance compels you to read on to the end.The obvious conclusion to be drawn from this book(or any book of history)is that the irrational is an unvanquishable aspect of the human psyche.Most of humankind can be likened to a windsock-led wily-nily by the latest fad,hype,consensus and collective madness whose outbreak is as inevitable as the turning of the globe.I wonder what Mackay would think of our mass media and pop culture,which lend themselves to massive hysteria,distortions and misinformation on an instantaneous and massive scale.The book is both funny and poignant.It makes you want to pity the human race for its inherent silliness.As many wise men have pointed out,humankind doesn't really change.The name of the fools who play the jester change;the fads,fashions and mass hallucinations change;the wallpaper and trinkets of life change,but the farce pretty much continues as before.If I didn't know any better I'd have to say the future holds much the same.

This is one of my favorite books of all time!!! It's amazing read this book and then to watch the media, the stock market, etc... it's like this book identifies recurring patterns that it seems to me that no even so-called experts of this day and age seem to see! It's an absolute must have to any serious investor or student of human behavior!!

I wanted to read this book to learn more about our current financial crisis. And I learned that if you think that the current financial crisis is an extraordinary event and our government will place proper regulations to prevent this from happening again, then you can keep on dreaming, or read this book instead. You will learn that manias such as what we experienced in the housing market and during the internet bubble are nothing new.

In this book, the author takes readers through the history all types of manias such as The Mississippi Scheme, The South Sea Bubble, and The Tulipomania. I found it amazing that we are no different from people 300 years ago. We are greedy and irrational and looking for quick ways to get rich. And unfortunately, we do not learn very well from history. This book is fabulous and I found it very interesting.

- Mariusz Skonieczny, author of Why Are We So Clueless about the Stock Market? Learn how to invest your money, how to pick stocks, and how to make money in the stock market

Goodness knows how many times this book has been reprinted, but it is a classic, it recounts many of the strange and popular freakish and delusional things that crowds have got up to over history. Tulip-mania, witch-hunts, fortune-telling, south-seas bubble. Its fun, fascinating and easy to dip into for a quick read as each chapter is really independent of the others. I re-read parts of this recently having just read Elaine Showalter's very controversial recent book "Hystories". Showalter's book is as much about modern psychological 'hysteria's' (as she calls them) - things like Recovered Memory Syndrome, and Ritual Abuse accusations which she seems to liken very much to popularist crowd behaviour . And while you may or not agree with her, I think it is interesting to read her book after this one. Still if you just want a bit of light read, then this book is definitely right up there - and it is always so much more fun and comfortable to be able to laugh gently at the patent ignorance of these poor deluded historical crowds!

I find myself looking at the copyright dates on this book over and over again - I simply cannot believe the book is over 150 years old! The annecdotes and lessons are still amazingly relevant today - I guess it goes to show that human nature doesn't change.

This is a great book for a straight-through read, or, as it is broken into completely independent chapters, it is a great bedside book that allows one to read a complete story. The chapters range from money schemes/scams, to witch trials, to the crusades, to the tuplipomania that took the Dutch en masse.

The book is fairly easy reading, especially as the language is 150 years old. The author tells each story with a slightly haughtly we-know-better-know attitude, a little tongue-in-cheek, and just the right amount of humor.

I definitely suggest this book for anyone who ever wondered "what makes people do that!"

Keep this book within handy reach for any time that you're getting a bit too smart for your britches. How otherwise intelligent and rational folk get themselves into these troubles is truly fascinating and instructive. The writing here is, of course, rather archaic to modern sensibilities (originally published in 1841) but the stories are interesting and very readable. It's tempting to read the tales as history but when I see Goggle trading at over $400.00 I scratch my head and wonder. And when I hear the president cutting taxes, increasing spending, and still assuring me that my Social Security payments are secure, well, I think there might be a few chapters still waiting to be writing in the book. A good read.

Years ago, in one of my MBA courses the Prof. mentioned this book and alluded to sections within the text how events which occured years ago are still applicable and effective today. My curiosity was picked so I searched for a copy and was able to obtain one at a local library. The reading was engrossing to say the least. The book deal with mass hysteria and mass public manipulation for political and financial gains. The events described are of massive proportions with world wide application and implication. After reading the book a big question mark floats over society where it allows itself over and over to fall on mass to charlatans, liars and deceivers who manage to lure the public to believe and trust their sordid tales and flim-flam to the point of selling their souls for a piece of the allusive dream. I recently found an old copy of the term paper I wrote on the book and decided to add a copy to my personal library. Rereading the book brought back the memories of class discussions and the interesting events mentioned. The books givs the reader a better understanding of how major world events take shape from rumors and minor incidents. A very easy read with a great and event filled story line. Should be read by all.

I'm not sure how to categorize this book - history, comedy, psychology. It does a good job in describing some of the most hysterical manias over the course of history, but not in a very exciting manner and I'm not sure to what point: no deep motives are presented and no conclusions are drawn. Some frenzies are described in too much detail (like in the case of 'The Duels') while others are very succinct (like the case of the Tulipomania).
Overall there are some interesting parts but it's mixed with some very boring ones... I recommend it if the reader is interested in a plain history of Mankind manias.
PS: By the way, it seems that we are not able to learn from the past. History keeps repeating itself...

Despite the age of this book, it continues to be current as ever, especially after the dot-com bubble. In different chapters, the author treats separate delusions which, at first sight, the reaction is that it could not happen today, until we see all that does in fact go on in the world.
I found the South Sea Bubble and the Dutch Tulipmania the two most outstanding cases. The analysis, given its dated nature, serves more as an image of historical thought. I would recommend one to read the chapter on Social Proof in CIaldini's Influence book, it goes into many of the issues that set off the manias.

I picked up this book on the advice of a friend, and have been rewarded for reading it, though it has not been a painless task. It is a pretty challenging read. However, MacKay weaves many interesting historical yarns about various popular investment schemes and how they drove people into delusionary behavior. Some of the stories are amazing, and certainly humorous (for example "patents" being granted for a perpetual motion machine). This book is worth your money, but you're probably not going to read it straight through. It's probably a better "bathroom read"; a few pages at a time over many months.

For a long time, I have wanted to read this 1852 classic, "Extraordinary Popular Delusions and the Madness of Crowds", but why I decided to do so recently, was because I was hoping to get some insights into understanding our recent Housing bubble and 2007-8 financial meltdown. I am glad I read it, because I did indeed come away with some 'extraordinary' insights.

Sure, this book goes into some historic financial bubbles, like Tulipmania, the South Sea Bubble, and the Mississippi land scheme. But, when it got into other manias involving witches, the Crusades, alchemy, popularity of certain phrases/expressions, fortune tellers, slow poisoners, duels, admiration of thieves, haunted houses, etc., it awakened me that our financial meltdown wasn't simply a repeat of other financial bubbles. We had the Internet bubble only a few years prior to what was happening with Housing, so most of us should have not been so blinded as Housing got out of hand. But, it is clear that we were also suffering from an overload of all kinds of manias, which I think, because of the depth of this book, appeared to condition so many in our society to find an even greater safety in 'crowds'. In particular, words like liberal and socialist were not just argued against, but actually successfully demonized, along with targeted uses of words like 'traitor' for anyone not supporting a US war, even trying to affix the term, 'terrorist' to Barrack Obama. Witness the success of Ann Coulter books, Fox News, etc. It is like if you just wanted to be a renter, there must have been something wrong with you, even anti-American, not wanting to participate in 'the ownership society', another term feeding into a financial mania. Plus, was anyone warning that this 'ownership society' was based almost entirely on debt, hardly real ownership? Heck, we were told after 9-11, the patriotic thing to do was shop, never mind sacrificing for the war. Also, our almost maniacal adoration of celebrities, outrageous salaries for athletes and CEOs, long lines for new introductions of new Apple products, Harry Potter books, etc, etc. We were a society primed with all kinds of 'extraordinary popular delusions', especially susceptible to a meltdown of generational proportions. Will we change? It does look like many are looking for some deeper societal transformation. But, as this book seems to show, transformation will be difficult, and we probably need to worry about transforming to just another mania, just as bad. We have a big task ahead. Too bad Mr. Mackay isn't around to write about our current manias.

Though the book is about 700 pages long, unless you are particularly interested in every detail of each mania, you can skim over lots of the details and complete the book in just a few days and still come away with a thorough understanding.

Keep this book within handy reach for any time that you're getting a bit too smart for your britches. How otherwise intelligent and rational folk get themselves into these troubles is truly fascinating and instructive. The writing here is, of course, rather archaic to modern sensibilities (originally published in 1841) but the stories are interesting and very readable. It's tempting to read the tales as history but when I see Goggle trading at over $400.00 I scratch my head and wonder. And when I hear the president cutting taxes, increasing spending, and still assuring me that my Social Security payments are secure, well, I think there might be a few chapters still waiting to be writing in the book. A good read.

This is the unabridged version. It's a difficult read because of the 19nth century writing style, but well worth it.

To this day, I still refer to it for research papers, or even just to have interesting things to talk about. An in-depth study of mass psychology, and the crazy things people do in large groups.

When reading this book you find that what's old is new and that
somethings really don't change much over time. What does change
is that the perception of market behavior can be quantified and
measured easily, when in fact, it cannot. Some of the accounts
of history date back over two hundred years, but yet are as relevant
today as when they originally happened. The facinating information
is that before the 17th Century, most of the wealth was concentrated
in the hands of landowners and royalty. There was no need for
grand financial markets since the ownership of the wealth was
passed down by death of their owners. One of the authors even
mentions "bubbles" which in today's financial lexicon is even
more relevant. If someone wants to fully understand what is
not understandable, they should purchase this book just to
enjoy the fact that they too, are not complete morons, but just
part of the crowd that thinks they are immune to the whims of
the market.

Thank you for sending me this book. In fact, because of an administrative mixup, I received two, but I shall be giving the second one to one of my friends. I had never suspected that any person writing as early as 1852 had viewed the large scale adoption of religeous or financial convictions in terms of a moral epidemic. When these convictions are misleading the results can be disastrous. What seems extraordinary at the time is that the general opinion is blind to the mistaken perceptions, even though one would think that a moment's rational thought would reveal their absurdity. The mistaken perceptions can be viewed as an illness,which can only be cured when the effects become evident. The vast financial bubbles that are bursting all over the world are a symptom of such madness.The fact that the madness has been global in extent is extraordinary.Therefore I believe that this book should be required reading for everyone, even though it is now too late to avoid the consequences of ten years of global madness.Please read this book.

Note that this book, "Extraordinary Popular Delusions" is a VERY condensed version of the original. This edition contains only 112 pages, the first three chapters, mainly dealing with economics while the original contains 768 pages. If you want only the material dealing with financial bubbles, then you can buy this edition, however you if you are interested in the broader phenomenon of the madness of crowds, then you'd do well to buy the original version of this book, which you can find under its full title, "Extraordinary Popular Delusions & the Madness of Crowds".

This was the warning shot ahead of the internet bubble. Hearing about the Dutch tulip bubble in 1995 (when I first read the book) we should have been well prepared to duck when the store, Ebay and their fallen comrades shot to the moon. If only we had listened...

The book clearly articulates why "The more things change, the more they stay the same" and helps us understand when to buck the herd. Perhaps a bit long, it is well written and worth the space on your nightstand.

I found reading this book a mixed experience. Some chapters: "The Mississippi Scheme","The South Sea Bubble", and "The Tulipomania" were very interesting and describe behavior common with recent financial crises. "The Crusades" describes a time when Christendom waged "jihad" on the muslums of the Holy Lands. "The Witch Mania" describes how this fearful and violent superstition lingered into the eighteenth century, centuries after the Modern Era is considered to have begun. And "Duels and Ordeals" describes the suprisingly destructive effect of dueling on the higher classes of European society into the early nineteenth century. Yet other chapters seemed very tedious to read, with "The Alchymists", 200 pages of repetition, being the most tedious. On balance, though, this is a book worth reading.

I purchased this book for a young friend working as a stock broker. I
already own a copy of Extraordinary Popular Delusions and the Madness
of Crowds by Charles Mackay, Copyright 1980 by The Rivers Press with a
forward by Andrew Tobias, ISBN 0-517-88433-X. The original work by Mackay
dates from 1841.

This new "version" is only 114 pages and has only 3 of the original chapters.
My The Rivers Press edition has 727 larger pages and has 16 chapters.
the store/CastAway Books mentions nothing in their online advertisement about
Harriman House Classics edition, ISBN 1-897597-32-0, being abridged. For
someone to republish an old version like this with only 3 of the original
chapters nearly constitutes fraud.

I am returning the book to Castaway Books.

Regards,
JohnD

This is a classic, written in the 1800's. It is a fascinating discussion of mass psychology, one might even say morphic fields. Well worth the read. My father actually gave this to me, to read, in high school. Bernard Baruch highly recommended it, among others. Worth googling to find the whole text, not just this extract

"Evian" is "naive" spelled backwards. I pay $0.88 per 1000 liters for water at my house tap. (And I love the taste!)($3.33/1000 gallons, in case you are not yet metrified.) Many pay a 1000 times this price for Evian. This just proves that naming, packaging and imaging are everything when selling to the "general public".
Given this, the book "Extraordinary Popular Delusions and the Maddness of Crowds" by Charles MacKay describes the major historical crowd delusions up to 1841 when the book was first published. The forward by Bernard Baruch, written in 1932, is alone worth the price of the book. MacKay does not analize crowd psychcology nor attempt to explain why these events occurred - so don't look here for predictions of the next stock market crash. The events are revealed from a purely historical perspective and in great detail. Overall the book is a fascinating journey into the mind of humanity.

Why do otherwise intelligent individuals form seething masses of idiocy when they engage in collective action?

First published in 1841, this Informative and entertaining book is the definitive history of manias. From ancient alchemy, to the crusades at the turn of the first century, witch-hunts during the 1400s to 1600s, tulip mania in 1624, and the Mississippi scheme and South Sea bubble of the 1700s, Mackay provides insights into human behavior which help explain the Great Crash of 1929, the Dot-Com bubble of the 1990s, and the recent global economic meltdown.

"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.", Charles Mackay.

Keep this book within handy reach for any time that you're getting a bit too smart for your britches. How otherwise intelligent and rational folk get themselves into these troubles is truly fascinating and instructive. The writing here is, of course, rather archaic to modern sensibilities (originally published in 1841) but the stories are interesting and very readable. It's tempting to read the tales as history but when I see Goggle trading at over $400.00 I scratch my head and wonder. And when I hear the president cutting taxes, increasing spending, and still assuring me that my Social Security payments are secure, well, I think there might be a few chapters still waiting to be writing in the book. A good read.

After hearing about this book for a long time, I recently read it. Mackay's book consists of one anecdote after another...for more than 700 pages. It offers very little in the way of analysis and explanations. If you like that kind of book, this one is for you.
I found this book boring and very overrated. I suggest that you skim a copy of this book before you buy it. After skimming it and getting a feel for what it contains, the chances are good you won't bother to buy it.

If you want to know why eBay stock was valued at over $25 Billion when the company was only earning $2 million, read this book. If you want to know why America Online stock is valued at over $100 Billion when the company only has sales of $4 billion per year, read this book. If you want to know why someone bid $9 million for a Van Gogh on eBay, which was never verified as a Van Gogh, read this book. (Don't worry though, the bidder can't be found, so it never sold!) If you want to know why the store.com stock traded at high as $221 a share, when the book value is only 48 cents a share and the company hasn't made a profit yet, READ THIS BOOK!

This book identifies and describes phenomena that most would assume to be foreseable and evident when observed as historical event.
However such manic human behavior keeps occuring over and over again, which inevitably (as history observes) have destructive consequences.

As many others have noted, this book is hard to read and it could certainly be written using much simpler vocabulary and probably in a fraction of its length.
However one must keep in mind that this book was initially written almost 200 years ago!

Personally, I value this book for the insights it offers into the history of crowd's delusions.
Consequently, the reader will hopefully be able to identify such manias in the future and act accordingly - assuming that he can remain detached enough from the mania itself.

This is a must read if you work in any kind of market-related profession. The historical perspectives offered in both books are well-written and provide ample documentation into the history of panics, manias and crashes.
The book, despite its age, holds up well against many modern books on the same topic and should definitely be considered a finance classic!

Old book and not one for people seeking a thrilling read. It is a 19th century thought piece on how people mislead themselves in many ways, including in ridiculous practices such as Alchemy. also speaks about the tendency, still true today, of people to fall for economic hoaxes that lead to very bad consequences

I downloaded the sample chapter, and I'm sure glad I did. Clearly this has been scanned via OCR, and no human eye has looked it over. There is text such as "POPK URBAK PREACH1HG THE CRUSADES" and "The ivit° of the diAy called it a sandbank, which would wreck the vessel of the Ktnte", a sure tipoff that this is raw OCR text. Don't waste your 99 cents; get it from Project Gutenberg, which takes the time to proofread.

First, let me state that this is not a review of the contents of the book. My three-star rating reflects the amount of confusion, mostly from 3rd party sellers, that surrounds this book.

There have been a lot of editions of this book published over the years. As other reviewers have noted, there are abridged and unabridged versions of this book for sale on the store. The Harriman House edition, as another reviewer pointed out, is abridged. Let me add that the 1980 paperback edition from Crown Trade is also abridged. It's a mere 97 pages and only contains a fraction of the original text. (Compare to the text on Project Gutenberg.)

If you're a 3rd party selling a used copy, be very descriptive in your listing. Double check what you are shipping.

Printing only three chapters of this fantastic work is a crying shame. If someone is going to take a classic (which is available for free download in its entirety at another site) and print a "Madness of Crowds for Dummies" type book, he should be hung at the nearest lamp post. This book IN ITS ENTIRETY should be required reading at least in college, if not in high school. Get the original, uncut version. Read it. You will never again go over the cliff with the rest of the herd.

This is a fascinating book, once you can decipher the Chaucer-like English that Mackay uses. Keep in mind this book was written 160 years ago! I'm 30 and I have a Bachelor of Science degree and still have to look up one or two words per page. Some paragraphs I had to read twice to understand. It ain't Dr. Seuss we're reading here!
If you can put up with ye olde English then this book does make for a fascinating tale of how fads develop and multi-level-marketing schemes are born. The stories can teach us why chain e-mail will never die and why the "dinner parties" of 1999 sprang up.

when the herd runs you can run with it..none of it makes any sense but what the heck,just roll with it..i think the current craze of tatoos and guys with goatees cracks me up-to look "cool".back in my day long hair and the hippie look.again,to look cool-they are all sheep-lots of old guys with dirty long hair ,ear rings, big bellies,stupid look here in California-when idiots make a run in the markets quietly go with and cash out before they bail-thats what i learned in this book(but we all knew that already anyway,right?)

It's always good to check a place like Project Gutenberg when you're considering older texts, especially things published before 1923. In this case, the book is in the public domain and you can download it for free.

This is one of the best books I own, so I wanted to give it as a gift. I did not need to read the reviews, but I wish I had. This is a short version of the original, containing only 3 examples out of dozens. It does not even contain the section on the Crusades, which I consider a classic. I returned the book as "defective" because somewhere in the sales page, this abridgement should have been noted. DO NOT BUY this addition because you will be missing many of the best parts of a classic

A famous trader in the early 20th century, Bernard Burach credited this book to his decision to liquidate all of his equity holdings prior to the 1929 market crash. What makes this book so special is how the situations described are so personal and specific that we come to understand that the world really has not changed much at all. Must read unabridged version.

Based on the previous 5-star rave reviews written here, I decided to give this book a try, especially since it's two books for the price of one. But when I opened up the book, I discovered that you don't even get Mackay's complete book; you get just the chapters relevant to finance/investing. Because I was reading the book primarily for insight into trading/investing I thought I would make do. However there was very little of that to be found, and when it was found, it was typically written in verbose, archaic English, sandwiched between many pages of irrelevant historical minutea such as how exactly transactions were conducted in the 1700's. There are a couple good gems, but nothing which has not been repeated in more modern books in much simpler language. E.g. The Money Game by Adam Smith or Market Wizards, or Mindtraps by Barach or any of Tony Oz's books. There are sooo many good trading books out there to read that reading this was a complete waste of time.

This book is simply overrated. It made a justifiably big splash when it first came out as it was the first book of its kind, but it would better be regarded as a classic than a current, practical discourse on the subject matter. The topics covered in the book are comically broad, ranging from financial bubbles to the evolving role of facial hair in society, and there is no obvious direction the reader is being led. I found the author's treatment of the subject matter to vary from an almost mockingly humerous satirical style to the historian's painful detailing of mindless minutia necessitating a quick couple page flips here and there. Yes, there is an interesting collage of bits and pieces to be found here, however the book more resembles the ramblings of a hermitic professor than something I would recommend to someone seriously seeking to expand their knowledge.

This was the only book I ever felt so ripped-off by that I returned it immediately to the store. I had a few experiences of total disappointment, but this book seemed to be nothing more than a copy and paste of 100 year old public domain material presented as a a relevant work. There is no original material worth mentioning or discussion of the contents lifted. Misrepresented in it's description ( there was but one rave review out of one review total at the time I purchased it) as others here have noted, this copy is not complete. I give it a zero. I'd recommend previewing this book/edition before you buy.

Though written in the mid-19th century, "Extraordinary Popular Delusions..." still rings true today. The almost irresistible lure of mass hysteria has shaped our world in more ways than we can imagine. McKay's book is not only a great work of scholarship, it is written with style and charm. A classic.

I have VOL I from a 1980 re-publication of Mackay's fantastic 1841 original. Would love to get VOL II. But, hey at less than twenty bucks you CAN'T go wrong even if the store only provides VOL I. It tells the story of some of the most amazing Mania's of time....man never learns; I expect a DOW 20,000 followed by a DOW 2000 and YOU can see it coming with just VOL I.

Any book in print for more than one hundred years is probably worth reading. If you think that the present financial disaster is novel, you must have overlooked this book. It was first published before 1850 and has been in print all this time.

Most grammar schools cover parts of this book but most people don't take it "to heart."

An excellent book. It should be required reading for everyone.

This is the greatest book ever written on the sub-prime mortgage meltdown and the internet bubble, and this is especially noteworthy since this book was written in the 19th century. Human nature does not change, and this book will always be worth reading.

The most fascinating thing about this book is how little things change. The South Sea Bubble episode which happened almost three hundred years ago is eerily similar to the whole internet stock market scene today. Will we ever learn ? One of the most interesting and thought provoking books I have read recently.

This book is a game changer. MacKay attempts to explain to people that human beings are inclined towards silly manias. He lists some of histories greatest episodes of total stupidity.
The financial manias of the South Sea Bubble, The Tulip Mania, and The Mississippi Scheme, are a must read for any would be investor. The lessons of any financial mania are timeless, as we all witnessed in the Dot Com bubble.
Humans will always be drawn to manias and silly trends. Sometimes these trends stay small and localized. At other times they explode into a world wide craze. MacKay lists some of the bigger manias, and outlines clear lessons to be learned. MacKay stresses that the group will whip itself into a frenzy, and only the individual has the brain power to identify the madness.
Once the reader is able to identify a wild craze, looking at world events will never be the same.
Do you remember hearing about the return of the Ice Age, in the late 1960s and early 70s? How about running out of oil, wheat, rice, and everything, in the 1970s. Acid rain killing the planet, back in the 1980s. Gee, I almost forgot about that one.
And of course the current Global Warming religious movement, is a truly world wild mania. It really is fun to laugh at these sort of events.
Mackay`s writing style is very old and rather boring. However, the message he delivers will live forever.

I recommend Edward Chancellor's "Devil Take the Hindmost" instead of this book. I enjoyed this book for first hundred pages (financial speculation), but I was not interested in the later sections of the book.

The content is interesting. However, the closely-spaced letters and lines in the typeface used for this book make it very tiring to read more than a page or two at a time. There is no forward, or information about the original publication date, etc. Seeing that the book can be downloaded in a readable typeface free from the Gutenburg Project, it was a poor value.

Purchased this book because the Table of Contents under Browse Sample Pages showed the full content of the book. However, the Harriman House Classics hardcover edition only has three of the chapters.

Mackay's anti-Catholic bigotry is well documented, and in this tome he leaves no opportunity to bash the "Romish Church" unexploited. I found the instances of anti-Catholicism in the book to be a major distraction from the rest of the content contained therein. In my mind such close-mindedness has a deleterious effect on the author's credibility.

This is a great sleep aid. Too long, and he uses too many complicated words when simple ones would have worked just as well. I suggest skimming through it instead of trying to read it cover to cover. It contains some interesting information about alchemy, haunted houses, the crusades and other things, but you have to wade through his verbage and unneccessary details to get to it.

Read any of the many short stories in Mass Delusions and you will know what the Kenneth Deffeyes, Richard Heinbergs and James Kunstlers are up against (today, as you read this, yes, that's right ;).

Good luck Gentleman and welcome to "Science On Trial II: This Time It Matters." Unfortunately, this time the Belief in Creationism (of energy and matter) isn't harmless, like Belief in Creationism by a godz.

Seriously, a sincere thanks for your efforts, and thanks for all the fish.

This book was delayed, and by the time I was notified of the delay, it was too late to cancel the order and reorder somewhere else. It was also the abridged edition. I would have preferred the unabridged edition.