Global Network Week: Lessons from the First Stock Bubble

February 20, 2014

Prof. William Goetzmann discusses the Mississippi Company bubble of 1720, during Yale's mini course on behavioral economics.

In a lecture recorded at Global Network Week in 2013, Yale's William Goetzmann discussed the mania for investment in the Mississippi Company that struck Europe in 1720, in what he describes as the first stock bubble. Prof. Goetzmann will again give a historical view of irrational economic behavior during Yale's mini course on behavior economics on March 3-7.

History is littered with the discarded dreams of those seduced by asset bubbles. The most famous historical bubble, of course, is the great tulip mania of 1630s Holland. But such events were fairly common in the 18th and 19th centuries. One less celebrated bubble, in 1720, involved the Mississippi Company, which was run by a Scottish financier named John Law and at one point controlled all French commerce outside of Europe. 

The Mississippi Company was created to manage France’s holdings on either side of the Mississippi River. Law, who fled England after killing a man in a duel and then ran a gambling operation in Amsterdam before being appointed controller general of France, managed to sell large portions of the French population on the promises of the New World.

Watch the video.