Apparently in the United States alone, there are around 20 million stamp collectors — it’s one of the most popular hobbies in the world. It makes sense; the rarest of stamps have sold for amounts on the order of millions of dollars, and less rare stamps can sell for tens of thousands. Clearly, stamp collecting is an investment.

However, The Independent details a time where the investment potential of stamps became so well known and pursued that the market itself collapsed:

But 20 years ago stamp prices did rocket out of control. In the late 1970s, a few unscrupulous individuals started to talk up the investment potential of stamps. Lots of articles appeared about the rise in the value of stamps, and national newspaper advertisements were taken out. Interest in philately as an investment medium gathered, as did momentum in prices. By 1980, average prices had jumped eight-fold. But a year later the market had been blown up out of proportion; the bubble burst.

This is clearly a case of an information cascade. As soon as people started seeing others notice the investment potential of stamps, they themselves began to take notice, apparently regardless of how safe of an investment it actually was. Unfortunately in this case, the information cascade took a turn for the worse since the huge number of people attracted to the hobby actually caused the market to collapse, or the bubble to burst — a case of a network effect.

Of course, this is not a unique incident. Bubbles have burst before — the internet bubble of the 90s and even the case of Beanie Babies, mentioned previously on this blog, are examples of the same type of phenomena.