Week 36 Day 6: The Wisdom and Madness of Crowds

Crowds are wise when individuals think independently and diverse opinions are aggregated. Crowds are mad when individuals copy each other and diverse opinions are suppressed. Market prices are wise in...

Crowds are wise when individuals think independently and diverse opinions are aggregated. Crowds are mad when individuals copy each other and diverse opinions are suppressed. Market prices are wise in the long run (reflecting all available information) and mad in the short run (reflecting herd psychology).