There is need for the development of psychological theories of collective irrationality. The Societal Theory of collective irrationality is presented, and the explanatory power of this new theory is demonstrated through three case studies of collective irrationality: the 2007–2008 financial crash, the election of Donald Trump in the 2024 US presidential election, and the behavior of Iranian women during the 1979 anti-shah revolution. These case studies demonstrate how the characteristics of context increase the probability of collective irrationality arising. Individual personality characteristics also play an important role in this process, as individuals with certain personality characteristics are more likely to participate in collective irrationality.