Maybe Bubbles Are a Good Thing: Economist Robert Shiller
Most investors live in dread of market bubbles, but the only person to have predicted both the 1990s bubble and the 2000s bubble, economic theorist Robert Shiller, believes they may not be that bad.
In the long run, it’s hard to say that bubbles are really bad. Take the internet bubble of the 1990s. What that did is generate a lot of startups; some of them foolish, some of them failed, but others survived. So, is it a bad thing?
— Robert Shiller
For all the painful results of bubbles, they also drive investment and growth. After balancing all the good and the bad, Shiller says it's hard to know if the world would be better off without them.
For example, the internet bubble bankrolled early Amazon, Google, and eBay.
Anyway, Shiller points out, the question is moot because we don't know how to prevent bubbles. His conclusion is:
Probably we would have been better off if we had tamed these bubbles. But our models are not accurate enough to tell us what the right policy is.
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