Famous First Bubbles

This volume offers markey-fundamental explanations for three famous bubbles: the Dutch Tulipmania (1634-16370, the Mississippi Bubble (1719-1720), and the closely connected South Sea Bubble (1720). He focuses most closely on the Tulipmania as it is the event modern observers view as clearly crazy.

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The jargon of economics and finance contains numerous colourful 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 18th-century bulbs to that of 17th-century bulbs, he concludes that the extremely high prices for rare bulbs and their rapid decline reflects normal pricing behaviour.
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.