Pop! Why Bubbles are Great for the Economy

Are investment bubbles a competitive advantage for the U.S. economy, or are they simply examples of the private sector run amok? What role does the visible hand of government and public policy play in the creation of a bubble by helping channel investments into hot new areas? Is there an upside to the rapidly deflating real estate bubble?

Daniel Gross, a columnist for Slate and the New York Times, explored these and other questions while discussing his new book, Pop! Why Bubbles Are Great for the Economy. In Pop!, published on May 8, Gross upends the conventional wisdom that bubbles are purely lamentable instances of investor foolishness. He argues that in the United States many investment bubbles have left behind usable commercial infrastructures that functioned as platforms for growth and innovation—from the railroad and telegraph in the 19th century to the internet today. In addition, he recasts the role of government in America’s bubble dynamic. Rather than simply helping to clean up the mess it leaves behind, government has been present at the creation of virtually every bubble. Public policy—through subsidies and tariffs, tax breaks and land grants—has always played an important role in encouraging investors to succumb to irrational exuberance.

Video of the event is available at right and a separate audio file is below. 

Participants

• Daniel Gross
  Columnist, Slate and the New York Times
  Author, Pop! Why Bubbles are Great for the Economy
• Sherle R. Schwenninger
  Director, Bernard L. Schwartz Fellows Program
  New America Foundation