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.

Famous first bubbles PDF

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