Herd Behavior & Bubbles

What you'll learn

• ✓Describe herding dynamics

Lessons

1. 🌷
   Tulip Mania

   When a flower cost a house
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2. The Rational Herd

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3. FOMO and the Asch Test

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4. The Bubble Parade

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5. Final Boss: How Bubbles End

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Sources

All content is drawn from the sources below. We deliberately avoid unverified material.

• Memoirs of Extraordinary Popular Delusions and the Madness of Crowds
  Charles Mackay, Richard Bentley (London), 1841 · book
  Popular source for Tulip Mania framing in lesson 1 and the modern vocabulary of 'crowds going mad' used throughout the module.
• Tulipmania: Money, Honor, and Knowledge in the Dutch Golden Age
  Anne Goldgar, University of Chicago Press, 2007 · book
  Archival corrective to Mackay. Source for Semper Augustus prices and the 'roughly ten times a craftsman's annual wage' figure cited in lesson 1.
• A Simple Model of Herd Behavior
  Abhijit V. Banerjee, Quarterly Journal of Economics 107(3), August 1992, pp. 797-817 · academic
  One of the two foundational 1992 papers behind the rational-herding framing in lesson 2.
• A Theory of Fads, Fashion, Custom, and Cultural Change as Informational Cascades
  Sushil Bikhchandani, David Hirshleifer and Ivo Welch, Journal of Political Economy 100(5), October 1992, pp. 992-1026 · academic
  Companion paper that names and formalizes information cascades. Backbone of lesson 2.
• Effects of Group Pressure Upon the Modification and Distortion of Judgments
  Solomon E. Asch, in Guetzkow (ed.), Groups, Leadership, and Men, Carnegie Press, 1951 · academic
  Original conformity experiment underlying the social proof / FOMO discussion in lesson 3.
• The First Crash: Lessons from the South Sea Bubble
  Richard Dale, Princeton University Press, 2004 · book
  Source for the 1720 South Sea episode and Newton's losses in lesson 4.
• Stabilizing an Unstable Economy
  Hyman P. Minsky, Yale University Press, 1986 · book
  Foundational source for the displacement / boom / euphoria / profit-taking / panic arc used in the boss lesson.
• A Short History of Financial Euphoria
  John Kenneth Galbraith, Whittle / Viking, 1990 · book
  Source for the 'short financial memory' framing and the recurring-pattern argument that closes the boss lesson.
• The 2000 Tech Stock Bust
  Federal Reserve Bank of San Francisco, FRBSF Economic Letter, 2003 · institutional
  Source for the Nasdaq Composite peak of 5,048.62 on March 10, 2000 and the subsequent ~78 percent decline cited in lesson 4.
  https://www.frbsf.org/economic-research/publications/economic-letter/
• Staff Report on Equity and Options Market Structure Conditions in Early 2021
  U.S. Securities and Exchange Commission, October 2021 · institutional
  Primary source for the GameStop January 2021 peak close of $347.51 and the mechanics of the squeeze cited in lesson 4.
  https://www.sec.gov/files/staff-report-equity-options-market-struction-conditions-early-2021.pdf