The financial crisis dejour – throughout history, real estate markets have experienced a crowd mindset. The more excited a market becomes, the more people want to buy in, and the higher the prices are pushed up.
This bubble has occured throughout history and the cycles can be analyzed consistently. Professor Watson teaches corporate ethics and the role of the market economy. Regardless of whether we want to analyze recent stock markets which have Burst, these fluctuations are not original. They have regularly occurred throughout time.
One of the most talked about historical markets that broke was Amsterdam’s Tuplip sector. We can study the Tulipmania of the tulip market that burst in 1637 as a popularly known historical account of a market that overheated.
Tulips were originally imported from Turkey in the early 16th century. As new “varieties” of tulips were sold, competition intensified and their prices soared. One apparently rare variety was the Semper Augustus which reached values in excess of 1,000 florins per single bulb in 1623. That price was more than six times the average annual income.
This industry mania continued – and 10 years later the price had increased another ten fold. At the market peak, the price of a single Semper Augustus bulb reached 10,000 florins – the equivalent of what it cost to purchase a house in the middle of Amsterdam at the time.
With time the market peaked and there was no-one left who still wanted to purchase these tulips at such high prices. Within weeks, the market price crashed and many of people were left in economic ruin.
Throughout history – we have seen similar bubbles develop. As the crowd mentality continues to get more excited, those contrary voices become less and less popular to be heard. Are any of the recent market bubbles any different? In today’s environment of PC speech, are the contrarian voices that stand up for morality, ethics, and integrity any different? Throughout time, these contrarian voices have been denigrated and ignored. But the market for products and the market for principles has a way of always correcting itself from the heat of the crowd mentality – and those extremist views tend to have their bubbles burst as the required correction occurs. Today’s market is no different.
