Extraordinary Popular Delusions and the Madness of Crowds

by Will on September 17, 2010

A post from Paul Krugman today parodies the title of Charles Mackay’s famous 1841 book. In that book, Mackay grappled with people’s tendency to buy into crazy, irrational ideas and ventures. He treated, specifically:

economic bubblesalchemycrusadeswitch-huntspropheciesfortune-telling, magnetisers (influence of imagination in curing disease), shape of hair and beard(influence of politics and religion on), murder through poisoninghaunted houses, popular follies of great cities, popular admiration of great thieves, duels, and relics

The fact that humankind is subject to these sort of follies, even to the detriment of its health and happiness, is one of my great fascinations. It is a phenomenon that follows logically enough from our inability to gather and weigh all available information (because time and analytic power are scarce, and information is infinite), to assess the credibility of sources, and because in the aggregate it is better for people to be unreasonably optimistic about their prospects for success (so that they will undertake efforts in spite of likely failure, a few of which will prove very useful, but most of which will fail and lead to nothing) and this flows over into overconfidence about investments and about one’s importance.

The con man understands this well, and by taking advantage of it makes a living. In the worst cases, the con man is an outright thief who simply fleeces his mark and leaves him infuriated. But more often, the con man is actually selling something of value: either a performance or a feeling that he creates in the mark. It is not the thing that he claims to be selling, but it is still something the mark is willing to pay for. We like to imagine that con men are few, but they are many, and on the public stage they often crowd out people of good faith. The most shameless ones get the furthest, win the most rewards, and earn the highest respects and devotion. But that is not to suggest that all promoters of popular follies are con men. The True Believer is also a common specimen.

It has been a long time since 1841. There have been many follies in the intervening time. Someone ought to document them. Just a few, most of which I’ve complained about in the past:

*The scientific racism of the late 19th and early 20th centuries, and its power as conventional wisdom and as a political movement: the idea that because one’s tribal group had stumbled upon a more productive system of social organization, one’s group was therefore inherently superior and entitled to eternal privilege, and the other groups worthy of killing off or sterilizing

*World War I: this great folly, and the fact that it went on and on for years, has still not taught us our lesson about the dangers of aggression and brinkmanship (as an aside, I think it’s a shame that we don’t give proper due to the German unionists whose revolt against their own government ended the slaughter)

*The flurry of speculation in Florida real estate in the mid-20s

*The flurry of speculation in stocks and other financial investments a few years later

*Prohibition: the belief that it would be useful to lock a bunch of people up for drinking beer and liquor, and the actual enforcement of this policy

*Public response to Orson Welles’s famous “War of the Worlds” broadcast

*The belief in extraterrestrials and their supposed visitations (a belief that seems to me to have arisen in conjunction with public anxieties about nuclear arms and the Cold War)

*The belief of party-line Communists, particularly after economic growth in the USSR had petered out  in the early 60s, that the models for western countries to emulate were a large, oil-rich state nonetheless forced to accept charitable crop shipments to feed its population, and the client states that depended on it for subsidies

*People’s unwillingness for many years to wear the seatbelts that their cars came equipped with, and their similar refusal to acknowledge that spewing toxins into the air might someday have undesirable consequences

*The movement, strong in the 90s, to convince people infected with HIV that the virus had nothing to do with AIDS, and that AIDS was actually caused by anti-AIDS medications

*Football riots

*The Iraq War and many other features of the War on Terror

*Our two recent speculative bubbles in internet companies and real estate

*The anti-vaccine movement

I’m sure there are others I’ve left out.

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