Economic Bubbles can Pop - Is anything unique Today?
The marketing trauma dejour - historically, financial markets have experienced a crowd mentality. The more heated a market becomes, the more individuals want to invest, and the higher the prices are pushed up.
This social experience has occured throughout history and the cycles can be analyzed consistently. Professor G. Watson teaches business ethics and the role in the market economy. Regardless of whether we want to think about recent technology markets which have Burst, these fluctuations are not new. They have regularly occurred throughout time.
One of the most well known historical markets that broke was Amsterdam’s Tuplip market. We can evaluate the Tulipmania of the tulip market that burst in 1637 as a popularly documented historical account of a industry that overheated.
Tulips were originally introduced from Turkey in the early 16th century. As new “varieties” of tulip bulbs were sold, competition intensified and their prices soared. One legitimately rare variety was the Semper Augustus which reached prices in excess of 1,000 florins per single bulb in 1623. That price was more than six times the average annual wage.
This market mania continued - and 10 years later the price had increased another ten times. At the market peak, the value of a single Semper Augustus bulb reached 10,000 florins - the value of what it cost to purchase a house in the middle of Amsterdam at the time.
Eventually the market peaked and there was no-one remaining who still wanted to purchase these bulbs at such high prices. Within weeks, the market value crashed and many of people were left in financial ruin.
Throughout time - we have observed similar bubbles develop. As the crowd continues to get more excited, those contrary views become less and less popular to be heard. Are any of the recent market bubbles any different? In modern times of politically correct speech, are the contrarian voices that speak up for morality, ethics, and integrity any different? Throughout time, these contrarian voices have been denigrated and ignored. But the market for products and the market for principles has a way of always correcting itself from the heat of the crowd mentality - and those polar views tend to have their bubbles burst as the required correction occurs. Today’s market is no different.
