A Sociology of Bubbles

A re-examination of the recent economic meltdown reveals not only the institutional roots of the collapse but the social foundations of markets themselves. Three aspects of the collapse seem particularly amenable to sociological analysis: bond-rating agencies and how they “know” what they think they know; the social networks and personal connections that encourage “herding” among financial elites; and the political consequences of recent transformations in investment. Striking in all this is the contrast between the massive scale of the global finance system and the concentrated, tight-knit nature of the financial community that helped create it.