Manias and Mimesis: Applying René Girard’s Mimetic Theory to Financial Bubbles

Abstract

While next-generation models in quantitative finance have illuminated the origins of market bubbles and crashes by incorporating herding and imitation behavior, the underlying cause of imitation in financial markets remains elusive. Given that imitation is at the core of bubbles, we need a deeper understanding of the phenomenon. In this paper, we apply Rene Girard’s mimetic theory in a series of case studies of historical speculative manias, from the 1840s railway mania to the ICO boom and collapse, and even to present-day mimesis-driven market distortions.