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A more interesting source than Bagehot - at least for the question at issue 
- is probably Charles Mackay's "Extraordinary Popular Delusions and the 
Madness of Crowds" (1841). There one finds the often quoted phrase "Men, it 
has been well said, think in herds; it will be seen that they go mad in 
herds, while they only recover their senses slowly, and one by one." 
 
I have recently done some work on financial contagion and came across two 
older articles that might be of interest: 
 
- Edward A. Ross (1902), "Recent Tendencies in Sociology", Quarterly 
Journal of Economics, Vol. 16(4), pp. 537-63. 
- John Maurice Clark (1918), "Economics and Modern Psychology II", Journal 
of Political Economy, Vol. 26(2), pp. 136-66. 
 
They both deal with the behavior of people in crowds and the phenomenon of 
"mental contagion". Ross refers to the German sociologist Gustave Le Bon 
and his hypothesis of the crowd as a "psychological unity". 
 
Thomas Moser 
 
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