The legends of the Mississippi and South Sea bubbles have survived today as warnings against the fatality of irrational exuberance in financial markets. However, because the details of these early financial crises are somewhat exaggerated, it has proved difficult for historians to separate fact from myth. The question remains whether investors behaved irrationally or sensibly in response to these events in the early eighteenth century. It appears that lack of investor sophistication and the negative effects of herding are partly responsible for the unsustainable price increases. Some argue that “irrational exuberance is the psychological basis of a speculative bubble.” However, many historians have denied that investors acted in a fit of “irrational exuberance,” believing instead that they responded sensibly to the information available to them. It seems that a combination of these two theories would better explain the extraordinary initial popularity of these two schemes. It is important, before examining the events of the Mississippi and the South Sea Bubbles, to approach the various definitions of the word "bubble". According to the Dictionary of Political Economy (1926), the first modern definition of a bubble is as follows: “any unhealthy enterprise accompanied by a high degree of speculation.” This suggests that the investor is basing his venture on an unwise or irrational assumption. However, Kindleberger appears to remove the presence of irrationality from the equation, defining a bubble as "an upward movement in prices over an extended range that then implodes." Therefore it is not clear whether the very manifestation of a bubble presupposes the existence of investor irrationality. Before classifying the victims... middle of the paper... first bubbles: the foundations of the first manias (Cambridge : MIT Press, 2000).• Hoppit, Julian, 'The Myths of the South Sea Bubble', Royal Transaction Historical Society, sixth series, vol. 12 (2002), pp. 141-65.• Kindleberger, Charles and Robert Z. Aliber, Manias, Panics and Crashes: A History of Financial Crises (New York: Palgrave Macmillan, 2011).• MacKay, Charles, Memoirs of Extraordinary crowds (London: Office of the National Illustrated Library, 1852). • Marietta, Morgan, 'The Historical Continuum of Financial Illusion' The American Economist, vol. 40, no. 1 (Spring, 1996), pp. 79-91.• Shiller, Robert J., Irrational Exuberance, (Princeton: Princeton University Press, 2005).• Walsh, Patrick, 'The South Sea Bubble: A Parable for Our Time', History Ireland, vol. 17, n. 2 (March-April 2009), pp. 6-7.