Shiller might have pondered a bit more the role that dreams and fantasies play in offering people a sense that, if they do not join in a speculative frenzy, they will miss out on a near-ecstatic experience enjoyed by others. He is right, but he does not draw out the full implications of how broad-based is the desire to fulfill one's fantasies through the market. So long as trading in stocks was undertaken by relatively few people for the benefit of relatively few people, limits existed on how far crowd psychology could push stock prices up. Rising stock prices have made more Americans wealthier than ever before. At the same time they implicate more Americans than ever before in the risks of market exuberance.
Crowd psychology matters more because the crowd has gotten so much bigger.
That the benefits of stock ownership are no longer reserved to the privileged few but have trickled down to the middle class is surely cause for celebration. How ironic, then, that the very economic security tantalizingly held out by this development requires a psychological security in the stock market that neither history nor economics can justify. The next crash to come will be the first crash after the democratization of the market. When it comes, we will have a hard time blaming it all on the machinations of elites, though some will try. But it will be impossible to avoid the conclusion that the pain we will suffer after the disaster happens will have a direct link with the pleasure that we sought before it happened.