More beach reads: How financial bubbles build, an ‘introduction to history’ and the dawn of the machine

After last week’s beach reads looked at the state of trade and politics, this week’s selections include Boom and Bust, a deep dive into what makes an economic bubble – particularly relevant perhaps in the age of AI. The shadow of technological revolution also looms in Humphrey Jenning’s Pandæmonium, while there is also a look at a fascinating foundational text of sociology, the Muqaddimah.

Boom and Bust: A Global History of Financial Bubbles by William Quinn and John D. Turner

Equity in Amazon, Japanese real estate and 1890s British bicycle company shares – these are just three of the assets wildly inflated by the economic bubbles examined in Boom and Bust. In this history, economists William Quinn and John D. Turner examine how bubbles build and burst with often unexpectedly positive consequences.

Particularly intriguing is Quinn and Turner’s discussion of the DotCom bubble in US tech stocks in the 1990s, when loose monetary policy fuelled a feeding frenzy for stocks in untested and unprofitable tech ventures.

Starting with Netscape in 1995, the boom fuelled the early growth of eBay, Amazon and others. Quinn and Turner contend that, while the US tech sector saw major long-term benefits from the rapid investment that came with the bubble, the complacency generated by its relatively minor effect on the economy set the stage for the catastrophe of the sub-prime housing bubble that burst in 2008.

The book’s most useful idea is the ‘bubble triangle’. Like a fire needs oxygen, fuel and heat to rage, so a bubble requires three things – supply of credit, marketability and speculation – to develop. Tested against historical cases from the 1720 South Sea Bubble to the one in the Chinese stock market of 2015, this proves a robust means of explaining – and perhaps predicting – how major booms begin and burst.

The Muqaddimah by Ibn Khaldun, translated by Franz Rosenthal and edited by N. J. Dawood

Ibn Khaldun, the greatest Arab historian of the fourteenth and perhaps any century, knew something about politics.

Born into a long line of administrators, operators and advisers, he was a sultan’s secretary in Morocco, a diplomat in Seville and prime minister of Egypt. He met with and wrote regional briefings for the Timurid emperor Tamerlane. Yet he is remembered not for his role in history, but his account of it: the Muqaddimah.

Meaning ‘an introduction’, the Muqaddimah is an introduction to history that helped to invent whole fields of study, among them sociology and formal historiography. Just as significantly, it laid down principles for avoiding bias in historical writing, critiquing the work of Ibn Khaldun’s contemporaries and establishing how to be a serious historian.

The book remains a font of insight fuelled by its author’s bitter experience of historical forces, examining how the peoples of North Africa and their cities rose and fell as their powerful bonds gave way to complacency and decline. His vision of complex societies ruined by the fundamentals of human nature is often dark, but it is a reminder of the importance to any community of solidarity and day-to-day closeness.

Pandæmonium 1660-1886: The Coming of the Machine Age as Seen by Contemporary Observers by Humphrey Jennings

Those who saw the 2012 Olympics Opening Ceremony may remember its crowning moment –  the sequence where factory workers painstakingly forged five flaming Olympic rings out of the dark mills of the Industrial Revolution. Danny Boyle, who directed the ceremony, said that
Pandæmonium was “the biggest single inspiration”, a “guided tour of the birth of electricity and the mechanical age”.

What makes the book so interesting is that it is more “tour” than “guided”. It is a collage of short excerpts, songs and letters from the period that saw Britain and later the world transformed by the machine. There are eighteenth century diagrams of hot air balloons and excitable letters to the Times, Dickens snippets and dashes of Milton. Together, they trace the excitement and fear that attended the development of machine power. There are also thoughtfully chosen and even tender glances back at a world in the process of vanishing.

An introductory essay by Humphrey Jennings, the documentary filmmaker who collated these sources, offers an intellectual route through the selections. He argues that the two hundred years he examined saw the relationship between humans and the world “violently and fundamentally altered” by, among other things, “the freedom of trade” and the invention of machines that defined the Revolution.

This alteration, he says, has starved what Charles Darwin called “the emotional side of our nature”. The evidence for the prosecution of this argument collected in Pandæmonium is also, however, a gentle defence of the ambition and idealism of the age.