Why 536 was ‘the worst year to be alive’

By Ann Gibbons, contributing correspondent for Science. Volcanoes erupting put ash into the atmosphere, causing lower temperatures that hurt farming. Interesting article that also goes into the economic impacts. Excerpts:

"Ask medieval historian Michael McCormick what year was the worst to be alive, and he's got an answer: "536." Not 1349, when the Black Death wiped out half of Europe. Not 1918, when the flu killed 50 million to 100 million people, mostly young adults. But 536. In Europe, "It was the beginning of one of the worst periods to be alive, if not the worst year," says McCormick, a historian and archaeologist who chairs the Harvard University Initiative for the Science of the Human Past.

A mysterious fog plunged Europe, the Middle East, and parts of Asia into darkness, day and night—for 18 months. "For the sun gave forth its light without brightness, like the moon, during the whole year," wrote Byzantine historian Procopius. Temperatures in the summer of 536 fell 1.5°C to 2.5°C, initiating the coldest decade in the past 2300 years. Snow fell that summer in China; crops failed; people starved. The Irish chronicles record "a failure of bread from the years 536–539." Then, in 541, bubonic plague struck the Roman port of Pelusium, in Egypt. What came to be called the Plague of Justinian spread rapidly, wiping out one-third to one-half of the population of the eastern Roman Empire and hastening its collapse, McCormick says.

Historians have long known that the middle of the sixth century was a dark hour in what used to be called the Dark Ages, but the source of the mysterious clouds has long been a puzzle."

 ""a cataclysmic volcanic eruption in Iceland spewed ash across the Northern Hemisphere early in 536. Two other massive eruptions followed, in 540 and 547."

"the summers around the year 540 were unusually cold"

"When a volcano erupts, it spews sulfur, bismuth, and other substances high into the atmosphere, where they form an aerosol veil that reflects the sun's light back into space, cooling the planet."

"A century later, after several more eruptions, the ice record signals better news: the lead spike in 640. Silver was smelted from lead ore, so the lead is a sign that the precious metal was in demand in an economy rebounding from the blow a century before, says archaeologist Christopher Loveluck of the University of Nottingham in the United Kingdom. A second lead peak, in 660, marks a major infusion of silver into the emergent medieval economy. It suggests gold had become scarce as trade increased, forcing a shift to silver as the monetary standard, Loveluck and his colleagues write in Antiquity. "It shows the rise of the merchant class for the first time," he says."" 

There Never Was a Real Tulip Fever

“Tulip Fever” sets its doomed entrepreneurs amidst 17th-century “tulipmania”—but historians of the phenomenon have their own bubble to burst.

By Lorraine Boissoneault of Smithsonian Magazine. It mentions the South Sea Bubble in 1700s England. That was the subject of another post recently and there is a link at the end of this one. Excerpts:

"What really happened and how did the story of Dutch tulip speculation get so distorted? Anne Goldgar discovered the historical reality when she dug into the archives to research her book, Tulipmania: Money, Honor, and Knowledge in the Dutch Golden Age."

"Here’s where the myth comes into play. According to popular legend, the tulip craze took hold of all levels of Dutch society in the 1630s. “The rage among the Dutch to possess them was so great that the ordinary industry of the country was neglected, and the population, even to its lowest dregs, embarked in the tulip trade,” wrote Scottish journalist Charles Mackay in his popular 1841 work Extraordinary Popular Delusions and the Madness of Crowds. According to this narrative, everyone from the wealthiest merchants to the poorest chimney sweeps jumped into the tulip fray, buying bulbs at high prices and selling them for even more. Companies formed just to deal with the tulip trade, which reached a fever pitch in late 1636. But by February 1637, the bottom fell out of the market. More and more people defaulted on their agreement to buy the tulips at the prices they’d promised, and the traders who had already made their payments were left in debt or bankrupted. At least that’s what has always been claimed.

In fact, “There weren’t that many people involved and the economic repercussions were pretty minor,” Goldgar says. “I couldn’t find anybody that went bankrupt. If there had been really a wholesale destruction of the economy as the myth suggests, that would’ve been a much harder thing to face.”

That’s not to say that everything about the story is wrong; merchants really did engage in a frantic tulip trade, and they paid incredibly high prices for some bulbs. And when a number of buyers announced they couldn’t pay the high price previously agreed upon, the market did fall apart and cause a small crisis—but only because it undermined social expectations.

“In this case it was very difficult to deal with the fact that almost all of your relationships are based on trust, and people said, ‘I don’t care that I said I’m going to buy this thing, I don’t want it anymore and I’m not going to pay for it.’ There was really no mechanism to make people pay because the courts were unwilling to get involved,” Goldgar says.

But the trade didn’t affect all levels of society, and it didn’t cause the collapse of industry in Amsterdam and elsewhere. As Garber, the economist, writes, “While the lack of data precludes a solid conclusion, the results of the study indicate that the bulb speculation was not obvious madness.”

So if tulipmania wasn’t actually a calamity, why was it made out to be one? We have tetchy Christian moralists to blame for that. With great wealth comes great social anxiety, or as historian Simon Schama writes in The Embarrassment of Riches: An Interpretation of Dutch Culture in the Golden Age, “The prodigious quality of their success went to their heads, but it also made them a bit queasy.” All the outlandish stories of economic ruin, of an innocent sailor thrown in prison for eating a tulip bulb, of chimney sweeps wading into the market in hopes of striking it rich—those come from propaganda pamphlets published by Dutch Calvinists worried that the tulip-propelled consumerism boom would lead to societal decay. Their insistence that such great wealth was ungodly has even stayed with us to this day.

“Some of the stuff hasn’t lasted, like the idea that God punishes people who are overreaching by causing them to have the plague. That’s one of the things people said in the 1630s,” Goldgar says. “But the idea that you get punished if you overreach? You still hear that. It’s all, ‘pride goes before the fall.’”

Goldgar doesn’t begrudge novelists and filmmakers for taking liberties with the past. It’s only when historians and economists neglect to do their research that she gets irked. She herself didn’t set out to be a mythbuster—she only stumbled upon the truth when she sat down to look through old documentation of the popular legend. “I had no way of knowing this existed before I started reading these documents,” Goldgar says. “That was an unexpected treasure.”"

Related post:

From 1720 to Tesla, FOMO Never Sleeps: The South Sea bubble is the classic story of an investing mania. Are investors today any wiser?

Does a Raise or Remote Work Sound Better?

Telecommuting is emerging as a coveted perk. Workers and their companies see the benefits, but how will they feel in 2021?

By Rachel Feintzeig of The WSJ. Excerpts:

"“The euphoria is kind of peaking,” says Nicholas Bloom, an economist at Stanford University’s Graduate School of Business.

Part of the appeal might stem from the fact that we’ve only been doing this for a few months, when the weather’s warm. Even if you remove the Covid-related factors from the equation—the chaos of taking conference calls with children underfoot, the stress of trying to focus as the world careens into crisis—there’s reason to believe working from home has some downsides. An experiment that Dr. Bloom did with workers in China in 2009 and 2010 found that intense loneliness tended to set in by the ninth month.

“This is like one year into a relationship,” he says. “It’s the early honeymoon where none of the fights have started.”

He declares remote work a 2019 perk, a 2020 necessity and a “2022 attribute which some people are going to like and others are going to loathe.”"

Related posts:

Companies Start to Think Remote Work Isn’t So Great After All

Since people feel more disorganized and chaotic when they are at home, should business leaders take this into account when they consider whether to make remote working the norm after the pandemic subsides?

Remote work is surprisingly productive (for now, but what about in the long-run?)

The FDA, Masks and Type I & Type II Errors

See FDA’s Shifting Standards for Chinese Face Masks Fuel Confusion: Some states stop using KN95s to protect workers; agency cites ‘regulatory flexibility’ by Austen Hufford, Liza Lin and Mark Maremont of The WSJ.

I use the book The Economics of Public Issues in my micro classes. Chapter 1 is called "Death by Bureaucrat." It discusses how the Food and Drug Administration can make either a Type I error or a Type II error.

Type I error: The FDA approves a drug before enough testing is done and when people take it, there are harmful side effects.

Type II error: The FDA tests a drug longer than necessary to stay on the safe side. But people might suffer because the drug is not yet available. 80,000 people died waiting for Septra to be approved.

The FDA would usually rather make a Type II error because the public can blame the FDA if a Type I error occurs. But in this case, they wanted to get masks to people quickly. Not enough testing was done. So it looks like a Type I error.

Excerpts from the article:

"Facing a severe shortage of N95 respirator masks in the early days of the coronavirus pandemic, the FDA made an emergency decision to allow importation of millions of Chinese-made masks, generally called KN95s, that were supposed to provide similar levels of virus protection.

But the FDA itself created confusion about which Chinese brands could be trusted for medical use, in part by giving—then revoking—its stamp of approval to masks that turned out to be subpar."

"The agency also relaxed its rules governing Chinese masks aimed at the general public, allowing hundreds of brands to be sold with little oversight and few quality checks"

"The FDA said its main goal was to help hospitals obtain quality masks and that it has never told the general public to use KN95s. It relaxed restrictions on masks of many kinds in response to public demand for face coverings during the pandemic, the agency said."

"*More than 60% of foreign-made masks, nearly all Chinese made, have failed basic U.S. government quality tests that looked at 220 such brands, according to U.S. regulatory data."

"*More than 3,500 Chinese manufacturers that have registered to sell KN95s in the U.S. were never fully vetted by any U.S. agency; some make virus-protection or filtration efficiency claims the FDA explicitly forbade when it relaxed the rules."

" “The FDA was in a Catch-22 situation,” said Vernessa Pollard, a former FDA enforcement lawyer now at McDermott Will & Emery. It needed to relax regulations to respond to the shortage of protective gear, but bad actors inevitably take advantage of under-regulation, she said."

"Federal officials realized there was a severe shortage of U.S.-certified N95 masks made both domestically and abroad."

"It gave essentially unfettered entry to masks intended for use by the general public, as long as the makers labeled them as face masks and didn’t advertise filtration efficiency or claim that the masks could protect against viruses."

Related posts:

Remdesivir and Type I & Type II errors

Do FAA drone regulations illustrate the tradeoff between Type I & Type II errors

Maker Of Thalidomide Apologizes

The Paycheck Protection Program and and Type I & Type II Errors

C.E.O.s Are Qualified to Make Profits, Not Lead Society

An old debate over the proper role of C.E.O.s has entered the political arena. But chief executives aren’t well equipped to take on broad social issues.

By Greg Mankiw. Excerpts:

“It’s way past time we put an end to the era of shareholder capitalism, the idea the only responsibility a corporation has is with shareholders,” he said. “That’s simply not true. It’s an absolute farce. They have a responsibility to their workers, their community, to their country.”

Mr. Biden echoed a stand taken last year by the Business Roundtable, a lobbying group. In a new “Statement on the Purpose of a Corporation,” 181 chief executives belonging to the organization committed themselves “to lead their companies for the benefit of all stakeholders — customers, employees, suppliers, communities and shareholders.”

In forsaking a mandate of narrow self-interest for one of broad social welfare, this approach to corporate management sounds noble, perhaps even obvious. But it is more problematic under closer scrutiny.

Imagine that you are the chief executive of an auto company. Your management team brings you a proposal: Let’s close a plant producing gasoline cars in Michigan and open one producing electric cars farther south. You must decide whether to approve the plan.

Under a conventional approach to management, you ask yourself one question: Would the change yield greater profits for shareholders?"

Under the Biden and Business Roundtable approach to management, you must ask many more questions. The range is dizzying. Here are just a few:

• How much will the closure of the old plant hurt its workers and their community?
• How do you weigh those losses against the gains to the would-be workers at the new plant?
• Given the nation’s history of systemic racism, should you consider the racial makeup of the two groups of workers, in an effort to reduce economic inequality?
• Does it matter whether the new plant is in South Carolina, providing jobs for American workers, or in Mexico, providing jobs for Mexican workers?
• How should you weigh the benefit of electric cars in mitigating climate change? Should you consider the global impact of climate change or only the impact on the United States?
• How should you balance these concerns against the interests of shareholders, who entrusted you to invest their savings?"

"From a company’s share price, a board of directors can glean how well its chief is serving shareholders."

"No similar metric is available to judge how effectively a chief executive is serving society as a whole."

Related posts

ESG Investing in the Pandemic Shows Power of Luck

ESG Investing Shines in Market Turmoil, With Help From Big Tech: The strength of socially responsible funds suggests they have staying power; ‘ESG is not a fad’

Funds that market themselves as sustainable investments aren’t necessarily focused on companies that fight climate change, develop wind turbines or promote diverse boards

ESG Funds Draw SEC Scrutiny (companies that pursue strategies to address environmental, social or governance challenges)

Is it a retailer’s job to keep shoppers from their vices? (or Adam Smith vs. CVS pharmacy)

Can You Find Virtue by Investing in Vice?

What if companies pledge to adhere to social and environmental accountability guidelines?

Conspicuous Consumption, Conspicuous Virtue, Thorstein Veblen (and Adam Smith, too!) 

Data show that socially responsible investments can outperform the S&P 500 index
 
Is altruism a result of selfishness?

Do you have to be selfish to make more money?

Does collective self-deception mask selfish behavior?

Why Doing Good Makes It Easier to Be Bad

Businesses intentionally display their social and environmental performance in addition to their financial performance to stakeholders

Should you invest according to religious guidelines?

For a humorous view of this issue see

A Snickers a Day Keeps the Doctor Away: Why does CVS want to make my migraine cures hard to find? by Joseph C. Sternberg of the WSJ

Companies Start to Think Remote Work Isn’t So Great After All

Projects take longer. Collaboration is harder. And training new workers is a struggle. ‘This is not going to be sustainable.

By Chip Cutter of The WSJ. Excerpts:

"as the work-from-home experiment stretches on, some cracks are starting to emerge. Projects take longer. Training is tougher. Hiring and integrating new employees, more complicated. Some employers say their workers appear less connected and bosses fear that younger professionals aren’t developing at the same rate as they would in offices, sitting next to colleagues and absorbing how they do their jobs."

"No CEO should be surprised that the early productivity gains companies witnessed as remote work took hold have peaked and leveled off, he adds, because workers left offices in March armed with laptops and a sense of doom.

“It was people being terrified of losing their jobs, and that fear-driven productivity is not sustainable,” Mr. Bock said."

"In San Francisco, startup Chef Robotics recently missed a key product deadline by a month, hampered by the challenges of integrating and testing software and hardware with its engineers scattered across the Bay Area. Pre-pandemic, they all collaborated in one space.

Problems that took an hour to solve in the office stretched out for a day when workers were remote"

"Teams physically building a product need to be together, Mr. Bhageria said. “There’s this thrill of being a little hacky group of people, on a shared mission, in a startup, with little money, eating pizza and ramen.”"

"It’s important to have people in a room and see body language and read signals that don’t come through a screen, says Mark Loehr, the CEO"

"One benefit of working together in person, many executives said, is the potential for spontaneous interactions. Mary Bilbrey, global chief human resources officer at real-estate giant Jones Lang LaSalle Inc., returned to her Chicago office in early June, as the company reopened its spaces. She noticed that she was soon having conversations with peers that wouldn’t have happened in a remote set up—a discussion sparked by a passing question in the hall, for instance."

"The toll of extended work-from-home arrangements is likely to affect career development, particularly for younger workers, several executives said. At Stifel Financial Corp., which employs more than 8,000 people around the world, junior employees learn how to underwrite deals or develop pitch books by sitting beside more experienced colleagues and watching them work"

"And then there’s the challenge of training employees who began work after the pandemic began and have had to work remotely from the start."

"They don’t have the same casual day-to-day opportunities to ask more experienced workers for help or advice that they would if they were working in the same office"

"New employees in marketing and analytics roles haven’t been able to quickly pick up company jargon and shorthand in meetings, leaving some of them lost."

"Without the interactions that define office life, Mr. Eichfeld worries that Discover’s culture will gradually fray"

Related posts:

Since people feel more disorganized and chaotic when they are at home, should business leaders take this into account when they consider whether to make remote working the norm after the pandemic subsides?

Remote work is surprisingly productive (for now, but what about in the long-run?) 

Can Fed policy work just by being announced and not necessarily being used?

Why Growth in the Fed’s Asset Portfolio Has Paused: That doesn’t mean the central bank has dialed back its support for markets or the economy by Nick Timiraos of The WSJ.

Private invetors might not want to buy certain assets like, for instance, corporate bonds. They may be pessimistic. Yet if the Fed announces a willingness to buy them, then investors have more confidence that these assets will retain their value even if the Fed does itself does not buy many of them.

Excerpts:

"The Fed’s asset buying falls into three categories. The first is a classic lender of last resort function: The central bank flooded short-term funding markets—the plumbing of modern finance—with loans."

"The central bank this month had no takers for short-term overnight loans called repurchase agreements, down from more than $440 billion in March. Arrangements where the Fed lends dollars abroad via currency “swaps” with foreign central banks declined to $122 billion last week from $449 billion in May.

Second, the Fed stepped in as a market maker of last resort by purchasing Treasurys and mortgage-backed securities when fire sales of these normally supersafe assets overwhelmed Wall Street dealers.

Third, the central bank backstopped an array of credit markets, interventions that brought officials well past the central bank’s comfort zone. The Fed is purchasing corporate bonds, loans to small businesses, and short-term debts of counties and states"

"In some cases, such as the Main Street Lending Program for small and midsize businesses, low uptake reflects complications the Fed and Treasury encountered launching the program and enticing banks and borrowers to use it. For others, lower volumes reflect the success the mere announcement of the Fed backstops have had in spurring private investors to buy assets.

“Looking at the quantity of loans the Fed is making is the wrong measure of success,” said Tiffany Wilding, an economist at Pacific Investment Management Co. If the Fed’s credit programs go to “full capacity, then it means conditions have worsened.”"

Will computer programs replace newspaper columnists?

See How do you know a human wrote this? by Farhad Manjoo of The New York Times.

In my macroeconomics class, we talk about the types of unemployment. Here is one of them:

Structural-unemployment caused by a mismatch between the skills of job seekers and the requirements of available jobs. One example of this is when you are replaced by a machine.

Excerpts from the article:

"This month, OpenAI, an artificial-intelligence research lab based in San Francisco, began allowing limited access to a piece of software that is at once amazing, spooky, humbling and more than a little terrifying.

OpenAI’s new software, called GPT-3, is by far the most powerful “language model” ever created. A language model is an artificial intelligence system that has been trained on an enormous corpus of text; with enough text and enough processing, the machine begins to learn probabilistic connections between words. More plainly: GPT-3 can read and write. And not badly, either.

Software like GPT-3 could be enormously useful. Machines that can understand and respond to humans in our own language could create more helpful digital assistants, more realistic video game characters or virtual teachers personalized to every student’s learning style.

OpenAI has given just a few hundred software developers access to GPT-3, and many have been filling Twitter the last few weeks with demonstrations of its surprising capabilities"

"Give GPT-3 a natural-language prompt — “I hereby resign from Dunder-Mifflin” or “Dear John, I’m leaving you” — and the software will fill in the rest with text that is eerily close to what a human would produce.

These aren’t canned responses. GPT-3 is capable of generating original, coherent and sometimes even factual prose. And not just prose: It can write poems, dialogue, memes, computer code and who knows what else.

GPT-3’s flexibility is a key advance. Matt Shumer, the chief executive of a company called OthersideAI, is using GPT-3 to build a service that responds to email on your behalf: You write the gist of what you’d like to say, and the computer creates a full, nuanced, polite email out of your bullet points.

Another company, Latitude, is using GPT-3 to build realistic, interactive characters in text-adventure games. It works surprisingly well — the software is not only coherent but also can be quite inventive, absurd and even funny."

Related posts:

McDonald’s Tests Robot Fryers and Voice-Activated Drive-Throughs: Burger giant wants to speed service as competition for fast-food diners mounts

Is Walmart adding robots to replace workers or because it is hard to find workers?

Robot Journalists-A Case Of Structural Unemployment?

Structural Unemployment In The News-Computers Can Now Tell Jokes 

WHAT do you get when you cross a fragrance with an actor?

Answer: a smell Gibson.

Robot jockeys in camel races

Are Computer Programs Replacing Journalists?

Automation Can Actually Create More Jobs 

The Robots Are Coming And It Might Not Be A Case of Structural Unemployment 

Broncos to debut beer-pouring robot at upcoming game

Robots Are Ready to Shake (and Stir) Up Bars  

In 1834 the British government spent about 40% of the national budget to buy out slaveowners to emancipate their slaves

Three Books on Jamaica: Anatomy of an Uprising: Back-breaking labor, an oven-hot climate, whip-bearing overseers and a planter class eager to exploit slave labor. Jamaica exploded in rebellion—and the empire struck back by Fergus M. Bordewich. He reviews three books in The WSJ. Excerpts:

"Just after Christmas in 1831, the British Empire’s wealthiest island [Jamaica] exploded."

"Hundreds of slaves, having been pushed beyond endurance, attacked hated overseers and their masters’ property. “We have worked enough already, and will work no more,” striking laborers told a pair of plantation owners. “The life we live is too bad; it is the life of a dog.” In all, 145 estate houses were destroyed and many others severely damaged."

"The uprising was soon over, having been weakened by its poor organization and thwarted by the failure of the island’s 300,000 slaves to rise en masse. It was also overwhelmed by the firepower of British troops. Few whites were killed, but the colonial elite’s confidence in its ability to defend itself was deeply shaken. Hundreds of enslaved men and women were killed in battle or summarily executed, some simply because they had attended a Baptist meeting."

"The revolt failed to improve conditions for the enslaved in Jamaica, but it crucially wounded the institution of slavery itself."

"it was only one factor in the ending of slavery, along with surging abolitionism in Britain, an increasingly muscular reform movement in Parliament, and the falling price of sugar, the islands only export crop. But the revolt, he says, “sent an unambiguous message to London that slavery was no longer sustainable—not economically, not militarily, and not morally.”"

"colonial Jamaica was characterized by extreme systemic violence against enslaved people. It was also ruled over by a dissolute planter class obsessed with short-term profits that made it cheaper to work slaves to death and buy new ones than to sustain them into their later, less productive years.

Long before India became the jewel in the empire’s crown, Jamaica was seen to be the “colony that was most indispensable to imperial prosperity,”"

"Jamaica’s rulers, many of them absentee plutocrats living in England, were the richest people in the entire British Empire by the 1770s and “probably had more influence within the British imperial state than any other colonial subjects of George III.” They bought seats in Parliament like baubles."

"In the late 18th century, planters could expect rates of return in excess of 17% annually on their investment. Output continued to grow as slavery became more “efficient”: Between 1750 and 1810, the average productivity of enslaved workers doubled as mistreatment became more calculated and systematic. For countless slaves, life was brutish and short. Cane fields were oven-hot and rat-infested. The labor was back-breaking. When cane was boiled during production, liquefied sugar clung to the skin like searing glue. Workers who arrived late in the fields were commonly subjected to a “slight whipping” of 10 to 20 lashes. Many died of sheer fatigue."

"British statesmen “thought that maximizing labor productivity, as with slavery, and producing goods, such as sugar, at the lowest possible cost for the benefit of a growing consumer class was central to any imperial policy,”"

"Slavery’s defenders, meanwhile, claimed that slaves had in fact been “rescued by British benevolence from the Hobbesian world of African cruelty and superstition.”"

"Revolts would recur every few years through the rest of the 18th century and into the 19th. Yet change was stirring. Less in reaction to the bloodletting than as a result of reformist impulses in England, the foundation was being laid for the political attack on slavery that would come to fruition in 1834. Beginning in the 1760s, reformers began to challenge both the immense power of Jamaican planters and the morality of slavery. Their critique gained traction as they made the case that the planters were determined to impose their tyrannical and “un-British” ways of life on free Englishmen, in part because, it was alleged, they would import Black slave labor into Britain itself.

In 1834, faced with rising public hostility and buffeted by fear of further rebellions, slaveowners and their parliamentary allies persuaded the government to buy them out. Commented one: “If the slavery of our colonies is a sin, it is the sin of the nation, and ought to be redeemed at the nation’s expense.” In all, £20 million was handed out to the empire’s slaveowners, about 40% of the national budget at the time. Full emancipation was completed in 1838. As Mr. Zoellner neatly puts it: “Three centuries of bondage were thus terminated with a dull bargain and a cash payout amid the grind of politics.”"

From 1720 to Tesla, FOMO Never Sleeps: The South Sea bubble is the classic story of an investing mania. Are investors today any wiser?

By Jason Zweig. I like articles like this that link economics and storytelling. In fact, I have another blog called Dollars and Dragons: A look at the intersection of economics and mythology. If humans are the storytelling animal (which is the name of a book by Jonathan Gottschall), then it wi worth looking at how stories affect or play out in the economy.

Excerpts from Zweig's article:

"In the summer of 1720, shares in the South Sea Co. and other leading stocks roared to all-time highs as speculators chased instant profits. Ever since, this sudden outbreak of stock trading has been known as “the South Sea bubble.” Even faster than it inflated, it burst—and left us with lessons about human nature that reverberate today.

From July 10 through July 12, 1720, South Sea shares perched at £950, up 650% for the year. Royal Exchange Assurance and London Assurance crested in late August, up an astonishing 1,243% and 4,220% for the year, respectively.

Then, in three catastrophic weeks in September, it all began crashing down. By the end of 1720, these leading stocks had fallen between 81% and 96% from their peak."

"They all were sucked in by a perfect magnetic storm: the rapid advent of newspapers, ready loans at low interest rates, and exciting narratives about technological innovation. Above all was the eternal human desire to be part of the in crowd, or what we today would call FOMO, fear of missing out."

"Bubbles are as old as financial markets. Even in ancient Babylon, commodity prices took sudden leaps and falls that can’t be fully explained by weather or war."

"In 1720 . . That June alone, 88 startups, most of them publicly traded, were launched in London. Many sought to raise £1,000,000 to £5,000,000 apiece (roughly $190 million to $945 million in today’s money)"

"Fistfights broke out over the right to buy stock while it still could be had; speculators thronged London’s financial district to buy shares in any company, desperately pleading, “we don’t care what it is.”"

"New media technologies—newspapers in 1720, radio in the 1920s, the internet in the 1990s, social media and smartphone apps today—are “the cultural substrate in which a mania can grow,” says William Deringer, a financial historian at the Massachusetts Institute of Technology.

As word spreads that “everybody” is doing something, it can be hard for anybody to resist joining."

"Imitation isn’t always irrational, either. It helped our ancestors save mental and physical labor and adapt more quickly to changing environments"

"That can quickly coalesce into a narrative, in which our imaginations rapidly transport us to different places and times. (“I’ll become rich, just like they did.”) A good story, as the poet Samuel Taylor Coleridge wrote, automatically triggers a “willing suspension of disbelief for the moment.”

"The South Sea bubble brimmed with “story stocks.”"

Like companies could "develop an “air pump for the brain,” convert sewage into gunpowder"

"The South Sea Co. had its own story: Originally created to sell enslaved people to Spain’s American colonies, by 1720 it had morphed into a complex scheme for refinancing the British government’s massive war debts."