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Famous First Bubbles: The Fundamentals of Early Manias
     

Famous First Bubbles: The Fundamentals of Early Manias

by Peter M. Garber
 

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ISBN-10: 0262571536

ISBN-13: 9780262571531

Pub. Date: 10/01/2001

Publisher: MIT Press

The jargon of economics and finance contains numerous colorful terms for market-asset prices at odds with any reasonable economic explanation. Examples include "bubble," "tulipmania," "chain letter," "Ponzi scheme," "panic," "crash," "herding," and "irrational exuberance." Although such a term suggests that an event is inexplicably crowd-driven, what it really

Overview

The jargon of economics and finance contains numerous colorful terms for market-asset prices at odds with any reasonable economic explanation. Examples include "bubble," "tulipmania," "chain letter," "Ponzi scheme," "panic," "crash," "herding," and "irrational exuberance." Although such a term suggests that an event is inexplicably crowd-driven, what it really means, claims Peter Garber, is that we have grasped a near-empty explanation rather than expend the effort to understand the event.

In this book Garber offers market-fundamental explanations for the three most famous bubbles: the Dutch Tulipmania (1634-1637), the Mississippi Bubble (1719-1720), and the closely connected South Sea Bubble (1720). He focuses most closely on the Tulipmania because it is the event that most modern observers view as clearly crazy. Comparing the pattern of price declines for initially rare eighteenth-century bulbs to that of seventeenth-century bulbs, he concludes that the extremely high prices for rare bulbs and their rapid decline reflects normal pricing behavior. In the cases of the Mississippi and South Sea Bubbles, he describes the asset markets and financial manipulations involved in these episodes and casts them as market fundamentals.

Product Details

ISBN-13:
9780262571531
Publisher:
MIT Press
Publication date:
10/01/2001
Edition description:
New Edition
Pages:
175
Sales rank:
796,344
Product dimensions:
5.37(w) x 8.00(h) x 0.25(d)
Age Range:
18 Years

Table of Contents

Preface
I The Bubble Interpretation
II Tulipmania Legend
1 A Political and Economic Background
2 The Traditional Image of Tulipmania
3 Where Does the Tulipmania Legend Come From?
4 Establishment Attitudes toward Futures Markets and Short
Selling: The Sources of the Pamphlets
5 The Bubonic Plague
6 The Broken Tulip
7 The Bulb Market, 1634-1637
8 Some Characterization of the Data
9 Post-Collapse Tulip Prices
10 Bulb Prices in Later Centuries
11 Was This Episode a "Tulipmania"?
III The Macro Bubbles
12 A Preliminary View: The Mississippi and South Sea Bubbles
13 John Law and the Fundamentals of the Mississippi and South
Sea Bubbles
14 John Law's Finance Operations
15 A Rehash of Mississippi Market Fundamentals
16 Law's Shadow: The South Sea Bubble
17 South Sea Finance Operations
18 Fundamentals of the South Sea Company
19 Conclusion
Appendix 1: The Tulipmania in the Popular and Economics Literature
Appendix 2: The Seventeenth-Century Tulip Price Data
Notes
References
Index

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