Bubbles. We’ve just been through two of them in relatively short succession: the Internet bubble of the late 1990s, and the recent housing bubble.
Why do bubbles occur? The list of explanations includes shortsightedness, sheer stupidity, and greed. The history of bubbles is a story of excessive enthuasisms—for anything from tulip bulbs to subprime mortgages.
But is there something more fundamental at work? Something more innate and psychological? It seems to me there is. It arises from who we are as humans, and in how we think and behave, individually and as social animals.