"A Bubble on the Mighty Mississippi: An Application of a General Model " by Alex Knight

Article Title

A Bubble on the Mighty Mississippi: An Application of a General Model of Speculative Bubbles to the Mississippi Bubble of 1716-1720

Authors

Alex Knight, University of Northern Iowa

Document Type

Article

Abstract

Speculative economic bubbles are a common phenomenon but are not wholly understood. Bubbles progress through a series of nine stages. A shock triggers a profitable redistribution of assets, credit creation and new investments; speculation fuels the economy; doubts burst the bubble. The Mississippi Bubble, in early 18th century France, presents an example to which this model may be applied. The history of the Mississippi Bubble, and a brief IS-LM analysis, show that speculative bubbles can be like a lively party: loud and boisterous, but with a mess to clean up afterwards. The French economy was left with a national hangover which stunted business activity and scarred the communal psyche. The model of speculative bubbles applies well to the Mississippi Bubble.

Publication Date

Spring 2002

Journal Title

Major Themes in Economics

Volume

Issue

First Page

Last Page

Copyright

Creative Commons License

This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.

Language

File Format

application/pdf

Recommended Citation

Knight, Alex (2002) "A Bubble on the Mighty Mississippi: An Application of a General Model of Speculative Bubbles to the Mississippi Bubble of 1716-1720," Major Themes in Economics, 4, 71-94.
Available at: https://scholarworks.uni.edu/mtie/vol4/iss1/6