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Extraordinary Popular Delusions and the Madness of Crowds

by Charles Mackay (1841)

Confusíon de Confusiones

by Joseph de la Vega (1688)

a two-book volume with commentary and editing by Martin S. Fridson, 1996, John Wiley & Sons, 214 pages, hardcover, ISBN 0-471-13309-4.

Here are two, bundled books that are recognized classics in the securities investment communities.  The books are noteworthy in (1) that greed and avarice are persistent human traits and (2) the features of modern stock trading were remarkably in place in 17th century Europe.

These books were on a recent list of the top ten investment books ever written.  Perhaps the lessons are timeless.  Persons familiar with historical investment manias will recognize the Dutch tulip craze, the Mississippi scheme (1719-20), and the South-Sea Bubble.  Not only were individual and institutional investors caught up in their greed, but these episodes very nearly ruined leading countries.

Marting Fridson, Editor, adds substantial value in putting these historical books into modern context.  The foreword is by Peter Bernstein, author of recent and popular books, such as Against the Gods: The Remarkable Story of Risk (Tip034).

Extraordinary Popular Delusions and the Madness of Crowds by Charles Mackay, 1841 

There are three chapters:

These historical bubbles are entertaining reading and illustrate the extents to which greed can work.

Confusíon de Confusiones by Joseph de la Vega, 1688

The introduction for this volume is by Hermann Kellenbenz, publisher of the 1957 reprint.  This book is written as conversation and describes the operation of early stock markets in the 1600s.  Most investors think the modern stock market is a recent invention.  What is remarkable about this short book is its description of trading that is much the same as today.  Terms like "shareholder," "brokerage fee" and "bears and bulls" were used.  Limit orders, margin calls, and front-running are example market features then, which are still applicable today.

This 2-book volume is useful in reviewing how stock markets evolved and the occasional disastrous speculative frenzies. The reading is interesting though sometimes is a bit tedious.  I was often frustrated in trying to convert currencies of the day into modern values.  The book will be especially interesting to investors interested in the behavior of market participants.

—John Schuyler, November 2003.

Copyright © 2003 by John R. Schuyler. All rights reserved. Permission to copy with reproduction of this notice.