Mass Hysteria

Mass hysteria is when irrational or wild and uncontrollable behavior spontaneously appears and spreads rapidly through a crowd or through a section of society.

Two of the most famous cases of mass hysteria are the Salem witch trials in seventeenth century Massachusetts, and the mass panic that spread in a number of American cities in 1938 during a radio broadcast of Orson Welles' adaptation of H. G. Wells' novel The War of the Worlds (it was about the invasion of earth by Martians--many people who tuned in the middle of the broadcast thought it was a real news report).

On the other hand, movements such as the Nazi movement in Germany and Heaven's Gate wouldn't count as mass hysteria--they were well thought out and intentional chronic pathogenic memes.

The stock market is another good example of mass hysteria. Basically, what determines a stock price is how many people want it, and what the majority are willing to pay for it. If only one guy wants a stock, and he wants to pay $5 for it, that's the price. But, if 500 people want to buy it, each person has to best the other 499 price-wise to get the stock.

So, the mass hysteria happens when some real world event triggers a sizeable group of people to sell their stock in a certain corporation. If enough people sell, the supply goes up and the price therefore goes down (see: supply and demand). All it takes is enough people to notice the falling price, and they decide they need to get out of the game while they still can. The only reason, at this point, that the stock would continue to go down is because an increasing number of people decide to sell it. And, this decision is generally based only on other people selling it.

So more people sell, which causes the price to fall further, which causes more people to sell, which causes the price to fall further, and so on. This is what happened in 1929, when the stock market crashed. It fell so rapidly that everyone tried to get out at once. It was all supply and no demand.

Today, most people are smart enough to realize that if they don't sell, they won't contribute to the hysteria and there won't be any problems. It's when jumping on the bandwagon seems so urgent, that the hysteria escalates and problems occur.