The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

South Sea Bubble

  • Hans-Joachim Voth
Reference work entry


The South Sea bubble resulted from an equity-for-government debt swap that had gone wrong, and occurred in England in 1720. Prices of South Sea Company stock rose sharply following the announcement of the scheme, and collapsed eight months later. Frequently cited as an example of investors’ folly, the factors driving the sharp rise and fall of South Sea Company share prices have remained controversial. The so-called Bubble Act of 1720, passed before the bubble peaked, restricted the development of a vibrant market in publicly traded companies for a century.


Bubble Act (1720) Law, John Mississippi bubble South Sea bubble Government debt 

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© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • Hans-Joachim Voth
    • 1
  1. 1.