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What it argues
A Short History of Financial Euphoria is John Kenneth Galbraith's compressed account of speculative bubbles from the tulip mania of 1630s Holland through the 1987 US stock market crash. Galbraith—an economist, diplomat, and bestselling author who served four American presidents—was in his eighties when he wrote this book, and it shows: the prose is drily funny, the learning is lightly worn, and the argument is stated without the padding that longer books on the same subject typically require.
Galbraith's thesis is simple and pessimistic. Financial manias are not aberrations; they are recurring features of capitalist economies that will continue to recur because their psychological preconditions—optimism about asset appreciation, amnesia about the last crash, social pressure to participate in apparent prosperity—are permanent features of human nature. The specific vehicles change: tulip bulbs, South Sea shares, railroad stocks, real estate, technology companies. The mechanism is the same every time.
What it gets right
- 1.
Speculative bubbles are not accidents or anomalies. They are recurring features of capitalist economies, produced by permanent features of human psychology, and they will keep happening.
- 2.
The central mechanism of every bubble is the same: rising prices produce apparent validation, which attracts more buyers, which drives prices higher, until the price can no longer be sustained by the underlying value.
- 3.
Amnesia is the financial system's most important vulnerability. Each new generation encounters the same conditions as a novelty, without adequate memory of how previous episodes ended.
What it covers
Who wrote it
John Kenneth Galbraith was an American economist, diplomat, and public intellectual who lived from 1908 to 2006. He taught at Harvard for decades and served as US Ambassador to India under President Kennedy. He was the author of more than 30 books, including The Great Crash 1929, The Affluent Society, and The New Industrial State, several of which became bestsellers. He advised four US presidents and was one of the most prominent public economists of the twentieth century. A Short History of Financial Euphoria, published in 1990, was one of his last works and is among his most concentrated.
