Tulip Bulb Mania
The effects of abandoning personal knowledge and using crowd knowledge to make decisions seems to have played a huge role during the 1600 European Tulip bulb mania. During that time, tulips became a hugely sought for commodity in which the belief that a simple flower couple be used as an investment medium drove the prices of the flower to over ten times the yearly earnings rate of skilled craftsmen. What seems to have happened was that people saw that more and more people were entering the tulip market causing demand to skyrocket and supply to dwindle. As prices rose, people anticipated continued price increases and this shifted trends so that more and more people participated.
Tulips became like a stock commodity and information cascades caused more and more people to abandon their doubts on the true value of tulips and join the astronomical crowd supported prices. At its peak, 40 tulip bulbs were worth as much as 100 tons of butter (for perspective, a skilled laborer earned as much as 1.5 tons of butter a year). People of all economic classes encouraged the purchase of tulips only to resell them at higher prices later on. Eventually, the value of tulips plummeted just as fast as it rose probably as part of another information cascade. This mania that caused the Dutch to trade everything from land, lift savings and anything else to contribute to a domino effect where more and more people lowered the prices of their tulips in order to sell them. No one came out of the mania unscathed as this bad information cascade caused a depression in Holland.