Talk:Economic bubble

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I did not know that the cause of bubbles was in dispute: I thought that it was a well understood phenomenon - in fact it pretty well described in the first paragraph of this article. —The preceding unsigned comment was added by 68.122.224.81 (talk • contribs).


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[edit] Speculative Bubble?

I have always known this phenomenon as "speculative bubbles" however this is never mentioned in the entry. I live in Australia and this may be why I haven't heard the other terms, I have done a little research and found that Investopedia.com uses the term "speculative bubble" - [1]. There is no mention of the 'bandwagon effect' that is often used to describe economic bubbles. —The preceding unsigned comment was added by Ryanesplin (talk • contribs).

"Speculative bubble" is a problematic term, as it presumes that speculation is the cause of the bubble. However, as the research cited in the entry shows, it is not clear that bubbles always arise due to speculation. Sslevine (talk) 07:48, 4 June 2008 (UTC)

[edit] Propose move to "Speculative bubble"

To comply with Wikipedia's common name rule, I propose moving this article to "Speculative bubble" because it seems to be a much more common term than "economic bubble". Investopedia uses the term "speculative bubble". Also, a quick Google search produces the following number of results:

  • "Speculative bubble" - 148,000
  • "Economic bubble" - 93,600
  • "Financial bubble" - 56,900
  • "Speculative mania" - 15,600
  • "Market bubble" - 369,000 - I believe the results of this term are highly exaggerated due to the frequency of the word "stock", "bond", or "housing" immediately before the word "market".

--JHP 05:52, 24 February 2007 (UTC)

Interesting, I checked Google AdWords and it appears that more people search for the term "financial bubble" than for "speculative bubble", "economic bubble", or "market bubble". BTW, the term "financial bubble" does not automatically redirect to this article. --JHP 07:33, 24 February 2007 (UTC)
There is no perfect solution, but "price bubble", seems the most descriptive, objective ("speculative" is a subjective interpretation, some bubbles express just plain scarcity, or examples "oil shocks") and generic notion. It covers all cases: economic (commodities, business cycles), financial (stocks, bonds, derivatives) real estate, art and collectible markets (elvis bubble ?), and plenty of other - speculative or not - either plain scarcities or collective fads, crazes and mania (tulipomania was among the firsts in history), that push up market prices beyond the stratosphere. Anyway, all redirects are possible for the more specific species of bubbles. --Pgreenfinch 08:04, 24 February 2007 (UTC)

[edit] "The central bank"?

"Therefore, it is imperative for the central bank to keep its eyes on asset price appreciation and promptly take preemptive measures to curb high level of speculative activity in financial assets." Really? Maybe it's just imperative that people learn not to do stupid things? The idea that (a) there is a central bank and (b) that if there is one, it should get involved in speculative bubbles seem to me to be unwarranted assumptions. There is no guarantee that any given economy that generates a speculative bubble will have a central bank, and I'm sure that it is hotly debated among finance geeks whether such an entity should intervene in a situation like this. --Michaeljsouth 11:23, 19 March 2007 (UTC)

I agree, this should be changed; it has a strong bias towards government intervention which has not been proven to be effective. Sheridp (talk) 19:04, 10 December 2007 (UTC)

[edit] Definition

This definition (and the related causation) does not seem to be commonly acceptable in the research literature on bubbles. Please provide a reference.

"The term refers to a market condition in which the prices of commodities or asset classes increase to absurd or unsustainable levels (that no longer reflect utility of usage and purchasing power). It occurs when speculation in the underlying asset causes the price to increase, thus encouraging even more speculation. The bubble is usually followed by a sudden drop in prices, known as a crash or a bubble burst. Both the boom and the bust phases of the bubble are examples of a positive feedback mechanism, in contrast to the negative feedback mechanism that determines the equilibrium price under normal market circumstances. Prices in an economic bubble can fluctuate chaotically, and become impossible to predict from supply and demand alone."

[edit] External Links

I believe we need to work on building on more external links for this page, as there are some great articles out there with insight in to when and or what the next economic bubble may be. Is there any one that would be against this? —The preceding unsigned comment was added by 65.118.190.226 (talk) 20:26, 30 April 2007 (UTC).

I, for one. Please understand that wikipedia is not a linkfarm. Please consider contributing content i.s.o. external links. Thank you. --Dirk Beetstra T C 21:52, 30 April 2007 (UTC)

The link to 'Table of major historical crises (through 1999)' requires a password. —Preceding unsigned comment added by Assylias (talk • contribs) 21:53, 9 April 2008 (UTC)

[edit] Unreadable

The 6th paragraph under Causes, starting with "Another insufficient explanation..." is practically unreadable. It refers to events in Austrailia as if the reader is already familiar with those events. Also it is not clear what relationship they allegedly have with bubbles. I'd try to rewrite it, but I can't really figure out what it's saying. 70.162.156.229 13:02, 24 October 2007 (UTC)


[edit] NPOV in first paragraph

The definition of economic bubbles as "trade in high volumes at prices that are considerably at variance from intrinsic values" is very problematic. It comes from a single (probably biased) source and it sounds suspiciously like thinly-veiled propaganda by Austrian School worshippers. Austrian-schoolers are well known for their belief that economic bubbles don't exist, at least not as an intrinsic property of markets. Their view is that bubbles are caused purely by external influences such as government meddling. By defining bubbles in terms of the intrinsic value theory, which has been discredited by most economists, they seem to be setting up a Straw man argument to disprove the idea that market-induced bubbles are a sound economic theory (which has NOT been discredited by most economists). I suggest including AT LEAST one alternative definition of economic bubbles in the first paragraph. For instance, a definition in terms of utility, purchasing power, and equilibrium price should be included. Does anybody know a source? Cambrasa (talk) 17:19, 12 March 2008 (UTC)

It sounds like a standard definition to me. I'm not aware of an alternative definition in terms of utility, purchasing power, or equilibrium price (unless equilibrium price is interpreted as that based on 'intrinsic' or 'fundamental' values). And I'm no Austrian. --Rinconsoleao (talk) 15:53, 13 March 2008 (UTC)
As the reference shows, the definition comes from three foremost students of bubbles, including Nobel laureate Vernon A. Smith. It is widely accepted among researchers of bubbles. -- Sslevine (talk) 07:46, 4 June 2008 (UTC)