Extraordinary Popular Delusions and the Madness of Crowds

Extraordinary Popular Delusions and the Madness of Crowds is an early study of crowd psychology by Scottish journalist Charles Mackay, first published in 1841. The book chronicles its subjects in three parts: "National Delusions", "Peculiar Follies", and "Philosophical Delusions". MacKay was an accomplished teller of stories, though he wrote in a journalistic and somewhat sensational style.

The subjects of Mackay's debunking include alchemy, crusades, duels, economic bubbles, fortune-telling, haunted houses, the Drummer of Tedworth, the influence of politics and religion on the shapes of beards and hair, magnetisers (influence of imagination in curing disease), murder through poisoning, prophecies, popular admiration of great thieves, popular follies of great cities, and relics. Present-day writers on economics, such as Michael Lewis and Andrew Tobias, laud the three chapters on economic bubbles. Scientist and astronomer Carl Sagan mentioned the book in his own discussion about pseudoscience, popular delusions, and hoaxes.

In later editions, Mackay added a footnote referencing the Railway Mania of the 1840s as another "popular delusion" which was at least as important as the South Sea Bubble. Mathematician Andrew Odlyzko has pointed out, in a published lecture, that Mackay himself played a role in this economic bubble; as leader writer in the Glasgow Argus, Mackay wrote on 2 October 1845: "There is no reason whatever to fear a crash".

Economic bubbles

Among the bubbles or financial manias described by Mackay are the South Sea Company bubble of 1711–1720, the Mississippi Company bubble of 1719–1720, and the Dutch tulip mania of the early seventeenth century. According to Mackay, during this bubble, speculators from all walks of life bought and sold tulip bulbs and even futures contracts on them. Allegedly, some tulip bulb varieties briefly became the most expensive objects in the world during 1637. Mackay's accounts are enlivened by colorful, comedic anecdotes, such as the Parisian hunchback who supposedly profited by renting out his hump as a writing desk during the height of the mania surrounding the Mississippi Company.

Two modern researchers, Peter Garber and Anne Goldgar, independently conclude that Mackay greatly exaggerated the scale and effects of the Tulip bubble, and Mike Dash, in his modern popular history of the alleged bubble, notes that he believes the importance and extent of the tulip mania were overstated.

Alchemists

The section on alchemysts focuses primarily on efforts to turn base metals into gold. Mackay notes that many of these practitioners were themselves deluded, convinced that these feats could be performed if they discovered the correct old recipe or stumbled upon the right combination of ingredients. Although alchemists gained money from their sponsors, mainly noblemen, he notes that the belief in alchemy by sponsors could be hazardous to its practitioners, as it wasn't rare for an unscrupulous noble to imprison a supposed alchemist until he could produce gold.

Other chapters

"Modern Prophecies"

"Fortune-Telling"

"The Magnetisers"

"Influence of Politics and Religion on the Hair and Beard"

Crusades

Mackay describes the history of the Crusades as a kind of mania of the Middle Ages, precipitated by the pilgrimages of Europeans to the Holy lands. Mackay is generally unsympathetic to the Crusaders, whom he compares unfavourably to the superior civilisation of Asia: "Europe expended millions of her treasures, and the blood of two millions of her children; and a handful of quarrelsome knights retained possession of Palestine for about one hundred years!"

Witch mania

Witch trials in 16th- and 17th-century Western Europe are the primary focus of the "Witch Mania" section of the book, which asserts that this was a time when ill fortune was likely to be attributed to supernatural causes. Mackay notes that many of these cases were initiated as a way of settling scores among neighbors or associates, and that extremely low standards of evidence were applied to most of these trials. Mackay claims that "thousands upon thousands" of people were executed as witches over two and a half centuries, with the largest numbers killed in Germany and Spain.

Other chapters

"The Slow Poisoners"

"Haunted Houses"

"Popular Follies of Great Cities"

"Popular Admiration of Great Thieves"

"Duels and Ordeals"

"Relics"

Influence and modern responses

The book remains in print, and writers continue to discuss its influence, particularly the section on financial bubbles. (See Goldsmith and Lewis, below.)

Financier Bernard Baruch credited the lessons he learned from Extraordinary Popular Delusions and the Madness of Crowds with his decision to sell all of his stock ahead of the financial crash of 1929.

The book was the initial inspiration for Richard Condie's National Film Board of Canada animated short John Law and the Mississippi Bubble (1978).

Forbes magazine compared Mackay's descriptions of financial bubbles to the Chinese stock bubble of 2007, claiming that the "emotional feedback loop" that drove the Chinese market was very similar to what Mackay described.

Neil Gaiman borrows from the title in an issue of his popular comic series The Sandman, in a story featuring a writer whose novel is titled "...And the Madness of Crowds".

Author and executive coach Marshall Goldsmith discussed the book in depth in BusinessWeek, drawing extensive parallels between the financial bubbles Mackay wrote about and financial bubbles today. Other writers also frequently point to the book to explain recent financial bubbles.

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, along with writings by Adam Smith, Thomas Malthus, David Ricardo, Thorstein Veblen, and John Maynard Keynes.

Author and journalist Will Self writes a column for New Statesman, "Madness of Crowds", which Self says takes its title from Mackay's book.

James Surowiecki, in The Wisdom of Crowds (2004), takes a different view of crowd behavior, saying that under certain circumstances, crowds or groups may have better information and make better decisions than even the best informed individual.

Quotations

"Men, it has been well said, think in herds; it will be seen that they go mad in herds, while they only recover their senses slowly, and one by one."

"Of all the offspring of Time, Error is the most ancient, and is so old and familiar an acquaintance, that Truth, when discovered, comes upon most of us like an intruder, and meets the intruder's welcome."

"How flattering to the pride of man to think that the stars on their courses watch over him, and typify, by their movements and aspects, the joys or the sorrows that await him! He, in less proportion to the universe than the all-but invisible insects that feed in myriads on a summer's leaf are to this great globe itself, fondly imagines that eternal worlds were chiefly created to prognosticate his fate."

"We go out of our course to make ourselves uncomfortable; the cup of life is not bitter enough to our palate, and we distill superfluous poison to put into it, or conjure up hideous things to frighten ourselves at, which would never exist if we did not make them."

"We find that whole communities suddenly fix their minds upon one object, and go mad in its pursuit; that millions of people become simultaneously impressed with one delusion, and run after it, till their attention is caught by some new folly more captivating than the first."

"The obnoxious hat was often snatched from his head and thrown into the gutter by some practical joker, and then raised, covered with mud, upon the end of a stick, for the admiration of the spectators, who held their sides with laughter, and exclaimed, in the pauses of their mirth, “Oh, what a shocking bad hat!” “What a shocking bad hat!”