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Politics : Foreign Affairs Discussion Group -- Ignore unavailable to you. Want to Upgrade?

To: neolib who wrote (260987)	4/8/2008 3:39:23 PM
From: TimF	Read Replies (2) \| Respond to of 281500

If you really believe that, then bubbles can only be determined in retrospect. You can get a feel for what seems like a bubble, but its not confirmed as a bubble until afterwards. If the price goes up a lot, but it turns out there is long term shifts in supply and demand behind the change, and after the faster and longer than expected price climb, the price returns to normal growth for the next decade, it would be pretty hard to say that the price increase was a bubble, even if it looked like one at the time. More common is a large jump up, that in retrospect did have more solid reasons behind it, followed by a speculative overshoot and an actual bubble. Meanwhile some start saying its a bubble before the rise is mostly speculation feeding on itself, and others say its not a bubble until all the sudden the bottom falls out. If bubbles can't be identified while happening I didn't say that they can't be identified, only that they couldn't be confirmed. If you where 99%, or 90% or even 75% sure that a price move was a bubble, that would be enough for many purposes to simply call it a bubble. And my real point is not "you can't say for sure its not a bubble until afterwards", but that the best measure of the dollar value for something is what the market says it is worth. Yes markets are imperfect, they are subject to bubbles, and crashes, but every alternative is even more imperfect. And the larger initial point is that economic policy shouldn't focus on creating jobs. Creating jobs is easy, but the jobs can be unproductive, or the cost to create them can destroy more jobs and/or wealth somewhere else in the economy. Real long term increases in per capita wealth come with increases in productivity, not by counting up how many jobs can be "created" by some government project.