Friday, March 05, 2010

NYT: China’s spectacular real estate boom may be a bubble that threatens the global economy.

Bubbles again--so frustrating. Like rubber-necking at crash sites, they cause immense systemic problems, even though they seem like they should be completely avoidable. Many economists firmly maintain the bubbles are inherent to the system (though specific policies, such as easy credit, can make them worse). I have this belief (foolish, vain wish?) that modern society is a little bit over-specialized, and that if people were a bit more well-informed as generalists, many things might run better.
Avoiding economic Bubbles is one of the things I think might be in this category. If people were much more aware of economic bubbles--including the fact that in every single bubble, some new reason is offered why "this is not a bubble"--would we be less likely to engage in this kind of mass foolishness?

2 comments:

  1. I believe bubbles to be caused by agents that prevent the free market from working efficiently. The agents themselves can be everything from government regulation (which can't adapt quickly to changing and varying situations) to individual people's belief systems (which tend to be inertial by nature--i.e., trends continue indefinitely).

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  2. When thinking about stuff like this and basic human nature and our flaws, I think of Homer Simpson who stood in front of the microwave and said, "Marge, isn't there anything faster?"

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