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A Victorian Lesson in Mania

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"Andrew Odlyzko of the University of Minnesota has produced a couple of fascinating new papers on contemporary forecasting during the British railway booms of the 1830s and 1840s," Edward Chancellor writes in the FT. "The extreme over-estimation of the potential market size for railways in the 1840s undermines the notion that financial markets digest all available information. Investors fall for “mythical numbers”, says Mr Odlyzko, who a decade ago pointed out the falsity of the claim that internet traffic was doubling every three months. In similar fashion, investors today accept uncritically the magical vision of a billion Chinese urban consumers. The railway manias remind us of the pitfalls of forecasting models, however basic."
SOURCE:   Financial Times