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'The South Sea Bubble of 1720: rational bubble or gambling mania?'

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The South Sea Bubble of 1720 is a famous stock market bubble. Traditionally, it was thought to have been caused by a widespread gambling or speculative mania. Recent scholarship in economic history has refuted this idea. Peter Garber argued that it was in fact a rational bubble. There is evidence to show that there were various rational reasons to invest in the South Sea Company and the stock market in general. Contemporaries vilified stock market activity as jobbing and gambling. Their arguments were often influenced by concerns about a nouveau riche being created or the presence of minority groups in Exchange Alley. The paper reviews some of the evidence from the slave trade which shows the South Sea Company was not uninterested in its trading activities. It also uses insights from behavioural finance to discuss the financial side of the affair.

This talk is part of the Financial History Seminar series.

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