Irrational Exuberance

By David Mandl, 10 September 2000

History is filled with examples of muddle-headed new-era thinking. Every artistic, musical and political movement has its share of megalomaniacs who think that all who came before were dinosaurs and losers. In the case of the most recent New Era cult, the cheerleaders and day-traders of the millennial bull market, there’s really no excuse: there’s loads of hard data to show how badly a half-dozen previous ‘New Economy’ frenzies have ended. It’s tempting to simply sit back and enjoy the fireworks, but economist Robert J. Shiller has taken a more beneficent approach in Irrational Exuberance, assembling a pile of figures and charts to demonstrate what an unsustainable level the financial markets have reached. More interesting, from not only an economic perspective but a psychological one as well, is how these things happen. Shiller discusses the role played by media cheerleading and the appearance of ‘revolutionary’ technologies like the Internet, but he also delves into the area of ‘behavioural finance’, looking at factors like herd behaviour, ‘expectational feedback loops’ and ‘information cascades’. Irrational Exuberance is well-researched, thorough, and a fascinating read, but for those of you who want to see more swaggering day-traders get their comeuppance: relax. This book won’t make a difference. That’s just the way it is.

Irrational Exuberance // Robert J. Shiller // Princeton University Press // 296 pages // ISBN 0-691-05062-7

David Mandl <>