Madness of Crowds

The term madness of crowds is a concept concerning the extreme and abberant conditions of group psychology in markets. The term was coined by Charles Mackay in 1841 in his book Extraordinary Popular Delusions and the Madness of Crowds which annaled the historical market manias and bubble of the 17th and 18th centuries.

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.

The term has since been adopted to describe mass irrationality in markets derived from bandwagon bias, profit seeking and trend following behaviour gone badly at scale.


  1. Mackay, Charles. 2012. Extraordinary Popular Delusions and the Madness of Crowds. Simon and Schuster.
  2. Shiller, Robert J. 2015. ‘Irrational Exuberance’. In Irrational Exuberance. Princeton university press.
  3. Bernstein, William J. 2021. The Delusions of Crowds: Why People Go Mad in Groups. Grove Press.
  4. Blanchard, Olivier J, and Mark W Watson. 1982. ‘Bubbles, Rational Expectations and Financial Markets’. NBER Working Paper, no. w0945.