Is there madness in the spirit-world too?

Yes; there is madness in the spirit world, too. 

The scenes that follow the death of a bad man are more easily imagined than described—

Those whom he has injured take pleasure if they are really bad enough to do so, or the injury has been so great, as to warrant it in making him miserable on his first arrival in their midst. 

They know that he will think he is not dead but merely haunted and that they are the ghosts of his former victims, and he really does believe in many instances and is almost driven mad with horror and fear. 

He flees from them and they pursue him, until, at length, driven by despair and rage to face them, he finds that his tormentors are only ordinary human beings like himself who hate him for the wrongs he has done them but cannot injure him physically. 

He accordingly recovers from his alarm and they leave him to his own devices; it being no further satisfaction to them to persecute him since they know that his own thoughts will be torment enough for him. 

He cannot obtain relief from his own thoughts, as he could on earth by drinking or pleasure-seeking because his thoughts are ever-present and his mind is incapable of being directed to anything else. 

This is one of the penalties that you have to pay, for the ignorance and blindness touching matters spiritual.