Speculative Supply Chains: How Rational Incentives Manufacture Madness of Crowds
This paper examines how rational incentives within supply chains can lead to collective irrationality, or "madness of crowds." It analyzes the mechanisms by which individual profit-maximizing behaviors aggregate into systemic inefficiencies, speculation, and boom-bust cycles in supply networks.
Background
- A new academic paper analyzing how **speculative manias** (meme stocks, crypto, NFTs) aren't just irrational crowd psychology, but are **engineered by rational incentives** within finance's supply chain.
- "Madness of Crowds" references Charles Mackay's 1841 classic on bubbles — the author flips it, arguing the real madness is structural, not psychological.
- SSRN is a major preprint repository for economics and law research; this paper ID (7022818) indicates a recent posting.
- Post-2020 context: debates rage over whether GameStop, crypto, and AI speculation reflect retail irrationality or deliberate institutional design. This paper likely applies **supply chain theory** (normally for physical goods) to model how speculation gets systematically produced.
- Core argument: individual actors (brokers, platforms, promoters) act rationally on their own incentives, but the aggregate result is collective instability — a "rational irrationality" / tragedy of the commons dynamic.