Economic bubbles, from the tulip mania of the 18th century to the 2008 housing bubble that triggered a global financial crisis, are seen as dangerous and destructive. And many claim we are in a new version, the AI bubble. But some argue there are benefits to delusional investments, which can be critical in driving progress. Victorian Railway Mania in Britain created many bankruptcies but gave Britain a railway system that cemented its global dominance. The late '90s dot-com bubble wiped billions off market value but gave us fibre optic cables that delivered the internet to the world. We don't know why a bubble starts, or even if we are in one until it pops, but amongst others, Jeff Bezos has claimed bubbles can be good because "when the dust settles, you see who the winners are and society benefits from the inventions.”
Should we embrace market bubbles, recognising and maximising their benefits? Do we need to abandon the myth of rational actors and see the economy and innovation as driven by delusion? Or is such thinking reckless and irresponsible?
Should we embrace market bubbles, recognising and maximising their benefits? Do we need to abandon the myth of rational actors and see the economy and innovation as driven by delusion? Or is such thinking reckless and irresponsible?
