Dan Gardner's Risk: The Science and Politics of Fear references this conformist psychology to explain events in the US during the same period. He describes a study by economists Robert Shiller and Karl Case who asked housebuyers in San Francisco, 2005, whether they thought their new houses would rise in value, and if so, by how much?
The homebuyers surveyed by Shiller and Case not only expected home values to continue rising, they expected them to soar: The average expected increase was 14 per cent a year for a decade. 'About a third of respondents reported truly extravagant expectations,' Shiller recounts in his book The Subprime Solution. Some actually anticipated increases of over 50 per cent a year.
Gardner argues that there could be psychological explanations for the whole experience, explanations that help explain the wider madness of house-buying crowds instead of scapegoating a few elite figures. In particular, he says that people were observing signals coming from others during the boom years, which reinforced a misplaced optimism in the profitibality of property:
...an 'informational cascade': the fact that many people believe something convinces more people of that thing, which settles it for still more people, and so on.
Now add the pernicious influence of confirmation bias. Then add news media reporting that not only failed to expose mistaken beliefs but accepted, repeated, and amplified them.