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Garber","","The article examines how economic and financial “bubbles” became entrenched as explanations for irrational and inefficient pricing in major historical episodes. It argues that before dismissing speculation as a bubble, economists should exhaust reasonable market-fundamental accounts, including changing beliefs about return probabilities driven by news, theories, fraud by insiders, or informed trading. The focus is on Dutch tulipmania (1634–37), the Mississippi Bubble (1719–20), and the South Sea Bubble (1720), linking modern literature and financial mechanisms to these cases.",{"@graph":69,"@context":122},[70,84,105],{"@type":71,"itemListElement":72},"BreadcrumbList",[73,77,79,82],{"item":74,"name":75,"@type":76,"position":8},"https://docshare.wps.com","Home","ListItem",{"item":78,"name":9,"@type":76,"position":14},"https://docshare.wps.com/document/",{"item":80,"name":40,"@type":76,"position":81},"https://docshare.wps.com/document/research-report/",3,{"item":83,"name":65,"@type":76,"position":19},"https://docshare.wps.com/document/famous-first-bubbles-article-by-peter-m-garber/638995/",{"url":83,"name":65,"@type":85,"image":86,"author":91,"headline":65,"publisher":94,"fileFormat":97,"inLanguage":63,"description":67,"dateModified":98,"datePublished":99,"encodingFormat":97,"isAccessibleForFree":100,"interactionStatistic":101},"DigitalDocument",{"url":87,"@type":88,"width":89,"height":90},"https://docshare.wps.com/thumbnails/famous-first-bubbles-article-by-peter-m-garber/638995.png","ImageObject",300,407,{"name":92,"@type":93},"A glass of water","Person",{"url":74,"name":95,"@type":96},"DocShare","Organization","application/pdf","2026-10-26","2026-10-22",true,{"@type":102,"interactionType":103,"userInteractionCount":14},"InteractionCounter",{"@type":104},"ViewAction",{"@type":106,"mainEntity":107},"FAQPage",[108,114,118],{"name":109,"@type":110,"acceptedAnswer":111},"Why does the article question labeling speculative events as “bubbles”?","Question",{"text":112,"@type":113},"It argues that economists should first exhaust all reasonable economic explanations and only use “bubble” as a last resort when market-fundamental accounts cannot be found.","Answer",{"name":115,"@type":110,"acceptedAnswer":116},"What kinds of market-fundamental explanations does the article propose?",{"text":117,"@type":113},"It highlights changes in the perceived probability of large returns, triggered by genuine news, new payoff theories, strategic fraud by insiders, or uninformed traders inferring dividend-distribution changes from price movements.",{"name":119,"@type":110,"acceptedAnswer":120},"Which three historical episodes does the article focus on and why?",{"text":121,"@type":113},"It focuses on Dutch tulipmania (1634–37), the Mississippi Bubble (1719–20), and the South Sea Bubble (1720). The author aims to provide market-fundamental explanations while noting that modern literature often treats them as bursts of irrationality.","https://schema.org",{"og:url":83,"og:type":124,"og:title":65,"og:site_name":95,"og:description":67},"article",{"robots":126,"canonical":83},"index,follow",{"doc_id":128,"site_id":62},638995,1793049868,{"code":4,"msg":5,"data":131},{"doc_id":128,"user_id":132,"nickname":92,"user_avatar":133,"doc_module":4,"category_id":39,"category_name":40,"doc_title":65,"doc_description":67,"doc_content":134,"file_id":135,"file_url":136,"file_type":137,"file_size":138,"view_count":14,"is_deleted":4,"is_public":8,"is_downloadable":8,"audit_status":8,"page_count":139,"language":140,"language_code":63,"site_id":62,"html_lang":63,"table_of_contents":141,"faqs":142,"seo_title":143,"seo_description":67,"update_tm":144,"read_time":145},962090760832,"https://ap-avatar.wpscdn.com/davatar_155a257f0dc6eb9ab79c44ca47cae57d","American Economic Association  \n# Famous First Bubbles\n\nAuthor(s):Peter M.Garber  \nSource:The Journal of Economic Perspectives,Vol.4,No.2(Spring,1990),pp.35-54  \nPublished by:American Economic Association  \nStable URL:http://www.jstor.org/stable/1942889  \nAccessed:08/10/201015:45  \nYour use of the JSTOR archive indicates your acceptance of JSTOR's Terms and Conditions of Use,available athttp://www.jstor.org/page/info/about/policies/terms.jsp.JSTOR's Terms and Conditions of Use provides,in part,thatunlessyou have obtained prior permission,you may not download an entire issue of ajournal or multiple copies of articles,and youmay use content in the JSTOR archive only for your personal,non-commercial use.  \nPlease contact the publisher regarding any further use of this work.Publisher contact information may be obtained athttp://www.jstor.org/action/showPublisher?publisherCode=aea.  \nEach copy of any part of a JSTOR transmission must contain the same copyright notice that appears on the screen or printedpage of such transmission.  \nJSTOR is a not-for-profit service that helps scholars,researchers,and students discover,use,and build upon a wide range ofcontent in a trusted digital archive.We use information technology and tools to increase productivity and facilitate new formsof scholarship.For more information about JSTOR,please contact support@jstor.org.  \n⑧  \nFamous First Bubbles  \nPeter M.Garber  \nhe jargon of economics and finance contains numerous colorful expressions todenote a market-determined asset price at odds with any reasonable eco-nomic explanation.Such words as \"tulip mania,\"\"bubble,\"“chain letter,”\"Ponzi scheme,\"\"panic,”“crash,\"and“financial crisis”immediately evoke imagesof frenzied and probably irrational speculative activity.Many of these terms haveemerged from specific speculative episodes which have been sufficiently frequent andimportant that they underpin a strong current belief among economists that keycapital markets sometimes generate irrational and inefficient pricing and allocationaloutcomes.  \nBefore economists relegate a speculative event to the inexplicable or bubblecategory,however,we must exhaust all reasonable economic explanations.While suchexplanations are often not easily generated due to the inherent complexity of eco-nomic phenomena,the business of economists is to find clever fundamental marketexplanations for events;and our methodology should always require that we searchintensively for market fundamental explanations before clutching the“bubble”lastresort.  \nThus,among the “reasonable”or\"market fundamental\"explanations I wouldinclude the perception of an increased probability of large returns.The perceptionmight be triggered by genuine economic good news,by a convincing new economictheory about payoffs or by a fraud launched by insiders acting strategically to trickinvestors.It might also be triggered by uninformed market participants correctlyinferring changes in the distribution of dividends by observing price movementsgenerated by the trading of informed insiders.While some of these perceptions might  \nin the end prove erroneous,movements in asset prices based on them are fundamentaland not bubble movements.  \nI aim in these pages to propose market fundamental explanations for the threemost famous bubbles:the Dutch tulipmania(1634-37),the Mississippi Bubble(1719-20),and the closely-connected South Sea Bubble(1720).Though severalauthors have proposed market fundamental explanations for the well-documentedMississippi and South Sea Bubbles,these episodes are still treated in the modernliterature as outbursts of irrationality.This may be attributable to the influence ofMackay's(1852)graphic descriptions of the frenzied speculative crowds which materi-alized in Paris and London in 1719 and 1720;from our current perspective,though,such“irrational”speculation probably looked a lot like a normal day in a pit of theBoard of Trade.  \nAs a justification for concentrating on these three bubbles,I wi","cbCaiqjcgLYrRlfJ","https://ap.wps.com/l/cbCaiqjcgLYrRlfJ","pdf",478614,21,"English","# Famous First Bubbles\n## The Three Bubbles in the Modern Literature","[{\"question\":\"Why does the article question labeling speculative events as “bubbles”?\",\"answer\":\"It argues that economists should first exhaust all reasonable economic explanations and only use “bubble” as a last resort when market-fundamental accounts cannot be found.\"},{\"question\":\"What kinds of market-fundamental explanations does the article propose?\",\"answer\":\"It highlights changes in the perceived probability of large returns, triggered by genuine news, new payoff theories, strategic fraud by insiders, or uninformed traders inferring dividend-distribution changes from price movements.\"},{\"question\":\"Which three historical episodes does the article focus on and why?\",\"answer\":\"It focuses on Dutch tulipmania (1634–37), the Mississippi Bubble (1719–20), and the South Sea Bubble (1720). The author aims to provide market-fundamental explanations while noting that modern literature often treats them as bursts of irrationality.\"}]","Famous First Bubbles - Article by Peter M. Garber | PDF",1792701047,53]