paper on technology bubbles

Andrew M. Odlyzko odlyzko at
Tue Jun 15 11:44:30 PDT 2010

I had a note in my files that you expressed an interest in the
project comparing the Internet bubble to the British Railway
Mania of the 1840s.  So here is the announcement of my third
work on this topic.

Any comments you might have would be greatly appreciated.

If I had you on the list by mistake, please accept my apologies.
If you will let me know, I will remove your email address right
away from the list.

Best regards,


  The collapse of the Railway Mania, the development of capital markets, and
  Robert Lucas Nash, a forgotten pioneer of accounting and financial analysis

                           Andrew Odlyzko

                       School of Mathematics
                   and Digital Technology Center
                      University of Minnesota

                           odlyzko at

                 Preliminary version, June 15, 2010


  The revolution in accounting, associated with the collapse of the great
Railway Mania in Britain at the end of the 1840s, is well known in broad
This paper contributes a description of the events that led to this
and of the key role played by Robert Lucas Nash in those events.  He was a
pioneer in accounting and financial analysis, providing studies on the
financial performance of railways that were more penetrating and systematic
than those available to the public from any one else.  His contemporaries
credited him with precipitating a market crash that led to one of two dramatic
changes in accounting practices that occurred in the late 1840s.  Yet his
contributions have been totally forgotten.

  The collapse of the Railway Mania provides interesting perspectives on the
development of capital markets.  The accounting revolution was just one of the
byproducts of the collision of investors' rosy profit expectations with cold
reality.  Shareholders' struggles to understand, or, more precisely, to avoid
understanding, the inevitability of ruin, have many similarities to the events
of recent financial crashes.  The Railway Mania events thus provide cautionary
notes on what even penetrating accounting and financial analysis reports can
accomplish.  Railway share price behavior suggests that Nash's contributions
had a much smaller effect than his contemporaries gave him credit for.


The previous two papers in this series are available at:

1.  Collective hallucinations and inefficient markets: The British Railway
Mania of the 1840s

2.  This time is different: An example of a giant, wildly speculative, and
successful investment mania


Press coverage of this project includes:

1.  Lee Gomes, All aboard The Bubble Express, Forbes, March 15, 2010.

2.  Matthew Lasar, Historian finds tech bubble that didn't pop (180 years
ago), Ars Technica, March 22, 2010.

3.  Manas Chakravarty, The 1830s railway mania: sole instance of a successful
'boom', Live Mint, March 26, 2010.

4.  Edward Chancellor, Bubbles: a Victorian lesson in mania, Financial Times,
April 12, 2010.

5.  Paul Kedrosky, Edward Chancellor on Bubbles, Railroads, and Andrew
"Infectious Greed" blog, April 11, 2010.

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