Extraordinary Popular Delusions and the Madness of Crowds [NOOK Book]


First published in 1841, Extraordinary Popular Delusions and the Madness of Crowds is often cited as the best book ever written about market psychology. This Harriman House edition includes Charles Mackay's account of the three infamous financial manias - John Law's Mississipi Scheme, the South Sea Bubble, and Tulipomania.
Between the three of them, these historic episodes confirm that greed and fear have always been the driving forces of financial markets, and, furthermore, ...
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Extraordinary Popular Delusions and the Madness of Crowds

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for disaster, and with the benefit of hindsight, he produced a record that is at once a riveting thriller and absorbing historical document.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

Originally published in 1841, this is a serious but frequently hilarious study of mass madness, crowd behavior, and human folly.

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Product Details

  • ISBN-13: 9780857191076
  • Publisher: Harriman House
  • Publication date: 2/2/2011
  • Series: Harriman House Classics
  • Sold by: Barnes & Noble
  • Format: eBook
  • Edition number: 2
  • Pages: 96
  • File size: 173 KB

Meet the Author

Charles Mackay (1841-1889) was born in Perth, Scotland. His mother died shortly after his birth, and his father, who had been in turn a Lieutenant on a Royal Navy sloop (captured and imprisoned for four years in France) and then an Ensign in the 47th foot taking part in the ill-fated Walcheren Expedition where he contracted malaria, sent young Charles to live with a nurse in Woolwich in 1822.
After a couple of years' education in Brussels from 1828-1830, he became a journalist and songwriter in London. He worked on The Morning Chronicle from 1835-1844, when he was appointed Editor of The Glasgow Argus. His song The Good Time Coming sold 400,000 copies in 1846, the year that he was awarded his Doctorate of Literature by Glasgow University.
He was a friend of influential figures such as Charles Dickens and Henry Russell, and moved to London to work on The Illustrated London News in 1848, and he became Editor of it in 1852. He was a correspondent for The Times during the American Civil War, but thereafter concentrated on writing books.
Apart from Extraordinary Popular Delusions and the Madness of Crowds, he is best remembered for his songs and his Dictionary of Lowland Scotch.
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Table of Contents

1. The Mississippi Scheme
2. The South-Sea Bubble
3. The Tulipomania
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There are fewer than a dozen books written more than a century ago that could be called classics of the social sciences. Charles Mackay's Extraordinary Popular Delusions and the Madness of Crowds is one of them, and it is probably the oldest. First published in 1841, Mackay's work was substantially revised and expanded in 1852, and this latter version has been reprinted often, and has probably never been long out of print in the past one hundred fifty years. The book includes quite a cast of characters: ghost hunters, alchemists, prophets, economic speculators, witches, crusaders, and faith healers, among others, all hold center stage in what amounts to a catalogue of beliefs gone awry and mass behaviors turned goofy (if not dangerous). Although modern scholars have more thoroughly explored most of the material Mackay covers, Mackay's descriptions have held up well; they are accurate and engaging. The range of topics Mackay covers is wide and in some cases deep. One reason Extraordinary Popular Delusions and the Madness of Crowds has become such a classic is that irrational behavior has never been in short supply, and modern examples of crazes, speculative bubbles, and mass hysteria continue to amuse, frustrate, and provoke us today.

Charles Mackay was born in 1814 in Perth, Scotland. His father was a military officer who was often away from home, and because Mackay's mother died when he was young, he was raised by foster parents. At age sixteen, Mackay began to earn his living as a private secretary to an industrialist based in Belgium, and he also wrote articles for newspapers in his spare time. Moving to London in 1832, Mackay embarked on a journalismcareer that resulted in major editorial positions at a succession of papers in Scotland and London, where his colleagues included Charles Dickens. As a journalist he did investigative reporting on the condition of the laboring classes in Great Britain, and he also served as a special correspondent for The Times, reporting on the Civil War in America. While Extraordinary Popular Delusions was well received and is the work that has kept Mackay's name alive today, its authorship does not seem to have been a major part of his reputation while he was alive. During his lifetime, Mackay was best known for his poetry. His collected verse, Voices from the Crowd (1846), was popular, and some of his poems were set to music and became hits of the day. He died on Christmas Eve, 1889.

The material covered in Extraordinary Popular Delusions provides ample support for the truth of the cliché that the more things change, the more they stay the same. For example, the first three chapters of the book describe financial schemes that escalated well beyond rational bounds and ultimately led to economic meltdown. Perhaps the most famous of those and arguably the most widely read chapter in the book concerns the tulip mania in the Netherlands during the seventeenth century. Tulips were introduced into Europe about 1550, and through hybridization and accidental variation a wide range of colors and shapes soon became available. Initially a garden of these plants was considered the mark of a discriminating gentleman, but by the 1630s, the Dutch began to collect tulip bulbs less for their blooms than for purposes of economic speculation. Tulip bulbs were bought and sold for what today might be tens of thousands of dollars; in some cases large mansions were given in payment for a single bulb. For a brief period, tulip mania drove the entire Dutch economy and, when the inevitable crash occurred, nearly crippled it. One suspects that modern readers do not need to be reminded that in the 1990s silly high-tech solutions to trivial problems and internet ventures of dubious value were financed all out of proportion to their economic viability. And, as happened during the tulip craze of 350 years ago, intelligent people realized that the internet boom could not last but continued to play the odds in hopes of getting rich fast. Some actually did, though most did not.

The longest chapters in Extraordinary Popular Delusions and the Madness of Crowds describe alchemists, who believed that they could turn base metals into ones of value and who, in some cases, believed they could discover the secret of eternal (or at least long) life. (Although their experiments did not produce their desired results, it must be noted that alchemists made non-trivial contributions to the early development of chemistry.) While we no longer have alchemists among us today, we do have considerable interest in freezing dead people for a distant awakening, and herbs, drugs, and medical treatments of no value are bought by people because of claims that they promote health and prolong life. Get-rich schemes based only loosely on existing technologies and what can only be described as science crazes (remember cold fusion) are no less a part of today's world than they were in the time of alchemists.

In subsequent chapters, Mackay deals with those who issue prophecies, fortune-telling, magnetizers (a form of medical quackery), fashions in hairstyles and beards, the crusades, witch hunts, murderers who used slow-acting poisons, haunted houses and ghosts, fads in slang, admiration of criminals, duels and ordeals, and the appeal of relics. Quite a list. It would be dull (and would spoil the reader's fun) to play the game of finding modern counterparts for all of Mackay's chapters. Individual readers will be able to come up with their own candidates easily enough. Superstition casts a long, dark shadow over history, and each generation has to discover independently the consequences of our failures to benefit fully from advances in human knowledge. Even today, despite the fact that the world is awash in education and we have the highest levels of intellectual sophistication in history, we cannot seem to escape the perils of a certain kind of irrationality. Of course, this is nothing new. The Old Testament is filled with examples of the chosen people not choosing wisely. The Trojan Horse is by no means the only example in ancient Greece of people ignoring potential perils of the big score. Indeed, viewed through a certain lens, history is a continuing struggle between the rational and irrational.

Certainly Mackay was far from the first to document how fragile rationality can be when overwhelmed by wishes. In a much different manner Plato, the Stoics, and many early Christian thinkers paved the way with analyses that are often surprisingly modern and psychologically penetrating. One thinks immediately of Francis Bacon's (1561-1626) doctrine of the idols that fostered the modern philosophical interest in false beliefs. Indeed, by the nineteenth century the study of false belief had become a major focus of epistemology and philosophy of science. But Mackay was only partially concerned with false beliefs per se; his larger interest was in exploring how such beliefs become established and supported socially, culturally, and collectively. In this sense his work might be seen as an early forerunner of the sociology of knowledge, a field largely initiated by Mackay's near contemporary Karl Marx (1818-1883).

Extraordinary Popular Delusions and the Madness of Crowds is a social-science classic but not because it was social science as we understand that term today. Later books such as Gustav Le Bon's The Crowd: A Study of the Popular Mind (1895) provided the bridge between descriptive and more theoretical accounts. Mackay was a journalist and not a social scientist, not even an embryonic one. In many respects the tone of Mackay's book is close to Alexis de Tocqueville's Democracy in America (1862), in which his observations on the United States in 1831-32 have the same sort of attention to telling detail, perspicacity, and objectivity mingled with some bemusement, that we find in Extraordinary Popular Delusions. Mackay's descriptions are clear and supply enough detail to provide a real flavor for the phenomena he describes. But rarely does he make an attempt at explanation, and the explanations he does provide (e.g., for the crusades) are standard confluences of historical and economic forces, the kind that have been used freely (and usually not very carefully) for the past several centuries. One looks in vain for the influence of social class, social strain, anxiety, alienation (to name but four major categories of explanation used today) on the behavior he describes. Despite the fact that Mackay is dealing with phenomena of great psychological interest, he rarely goes beyond standard descriptions of emotion and feeling. Of course, we ought to remember that Extraordinary Popular Delusions was written well before any reasonable date for the birth of modern psychology. Nevertheless, that may be letting Mackay off a bit too easily because he was native to a country that had produced more than its share of what might be called pre-modern psychologists. Scotland was, after all, the home of David Hume (1711-1776), Thomas Reid (1710-1796), Dugald Stewart (1753-1828), William Hamilton (1788-1856) - all psychologically oriented philosophers, many of whom wrote about both the limitations of human reason and the nasty effects of its abandonment for superstition. Perhaps it was too much to expect Mackay, who never went to university and had a truncated secondary education, to have made use of their insights, yet the Scottish philosophers were better known among intellectually sophisticated people of the time (a group that certainly included Mackay) than philosophers tend to be these days.

In the final analysis we must take Extraordinary Popular Delusions and the Madness of Crowds for what it is and not for what a modern social scientist might have done with the same material. But that is justification enough for his work. Mackay's purpose was to warn rather than explain, and at the beginning of an era in Great Britain that celebrated the importance of rational and scientific approaches to solving problems and a belief in the power of education to create rationality, this book was caution indeed. Its main value in both Mackay's time and ours may lie in its documentation of a wide range of material which seems eternally modern, making only slight allowance for differences between the witch hunts of yore and the communist investigations of the 1950s in the United States or the hysteria over alleged sexual abuse in daycare centers during the 1980s. While each of the topics Mackay discusses had been described and even analyzed before, it does not seem to be the case that anyone had previously brought such a wide range of material together under a common roof. Extraordinary Popular Delusions not only provides a readily accessible archive of human silliness for subsequent scholars to mine, but it also prompts thoughtful readers to wonder about the connections between the various phenomena Mackay describes. What do witch hunts, crusades, and economic panics have in common? To some extent we are still trying to figure out the answer to that question, but modern readers can, at a minimum, thank Charles Mackay for broadening the "database" and implicitly raising questions of comparison.

More important than situating Extraordinary Popular Delusions in a historical context is the question of whether this curious book is worth reading today. It surely is. The material is fascinating, the writing engaging, and the phenomena are in their own way as modern as can be. The book is literate (in a Victorian sort of way, but without being fussy), and for the most part it is an interesting read. While Mackay always makes clear that he is well on the respectable side of a line separating rationality from superstition, he generally avoids making fun of his subjects - he plays it remarkably straight. Perhaps one reason Mackay is able to be evenhanded is that most of the examples he discusses were historical even by the mid-nineteenth century. Distance can provide a measure of objectivity that most of us find hard to achieve in describing our own times.

Since Extraordinary Popular Delusions lacks an overarching explanatory framework (if it had one, it would likely be outdated), the chapters are independent and one does not have to read the book from beginning to end. The reader can begin anywhere. One good place to begin is with the relatively short chapter on the tulip craze, and then perhaps to move on to the chapters on the crusades or witch hunts. Although some chapters (such as the lengthy discussion of alchemy) are somewhat repetitious and can begin to feel like too much of a good thing, there is something of interest in every chapter. The reader can pick and choose, even read selectively within chapters. The phenomena Mackay describes still have the power to fascinate and intrigue.

David J. Schneider graduated from Wabash College and obtained a Ph.D. from Stanford University. He has taught at Amherst College, Brandeis University, Stanford University, Indiana University, and the University of Texas at San Antonio. He is presently Professor of Psychology and Cognitive Sciences at Rice University, where he teaches courses in social psychology, stereotyping and prejudice, history of psychology, and the psychology of beliefs.
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Sort by: Showing all of 2 Customer Reviews
  • Posted February 23, 2009

    Madness and Money!

    This short version of Charles MacKay's book, Estraordinary Popular Delusions and the Madness of Crowds, which was first publilshed in 1841, should be on the reading list for anyone looking to make a fast buck, in the stock market or elsewhere. Change the names, places and time frame, and you would swear that it was just written. Amazing!!

    Popular delusions affect many investors - just ask Madoff, and other swindlers. The urge to "get rich quick" is mostly delussional. Once in ten thousand investments does one "hit the jackpot". The "Hula-hoop" back in the 50's is a classical example of hitting it big.

    President Obama should take the time to read this, but then again, he may not be invested in the market, or anywhere else. Americans are easily swayed by the "Rainmaker". This book, if read and compared to today's current affairs in the United States, and around the world, will reveal that human beings are gullable, as well as greedy, otherwise, they would be more cautious with whom they place their trust with their hard earned funds.

    3 out of 3 people found this review helpful.

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  • Anonymous

    Posted December 29, 2014

    No text was provided for this review.

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