Bubbles: Some Perspectives (and Loose Talk) from History

Bubbles are a topic of great importance and great controversy. This paper discusses alter-native perspectives on the economic meaning and origin of bubbles. Drawing on historical approaches to bubbles, this article sets out a taxonomy of approaches used to explain the nature of bubbles. The paper also considers issues connected with the scientific thinking surrounding bubbles. (JEL G12, B0, E30) When the conference organizers asked me to give a short lunch talk on the topic of bubbles, my first response was to decline. This reticence stemmed not from a lack of interest on my part, but rather from a sinking feeling that any such talk was doomed from the start. I knew the cause of this foreboding. Several years ago, I organized the AFA meetings and had the privilege of putting together what turned out to be the last Proceedings issue. Among the papers I included in the issue was an analysis by Jay Ritter and Ivo Welch of IPO behavior over the 1990s.1 Shortly after the issue appeared, I was copied on an e-mail written by a very senior finance person to his departmental colleagues. While the merits of the specific article seemed not to be in question, the author of the e-mai