See Chapter 22
Meaningless.
Large is a relative term, so who knows what you’re talking about. Bubbles are caused by monetary growth; sectors can grow, but they do so at the expense of other sectors.
It’s easy to be happy with something you don’t understand.
Some reading recommendations for Mickanomics.
Also as a neural networker working in AI you should probgably read up on the concept of Praxeology and understand that modeling human behavior is limited. You make a cognitive error that human behavior can be modeled by a computer, possibly to predect human behavior. As a result I’d like to recommend this.
Human Action
Possibly Accompanied with the Study Guide
The ABCT has nothing to do with motivation.
I’ve already asked him to investigate Austrian methods like praxeology on his blog several weeks or even a month ago.
I was aware of those arguments, and generally agree with them.
If the size of the “bubbly” market represents <1% of the total economy (like perhaps fine art or antique toys) then a bubble could comfortably double or triple the price of that commodity without causing any noticeable struggle to buy other things.
Well having spent most of my adult life attempting to model human behaviour, I am very interested. The book is 900 pages long, can you tell me in what chapter I should read to be best convinced that human behaviour can not be modelled? If I like that chapter I may go on to read the whole thing.
Right, but it still would not be able to misallocate assets significantly, because it is less than 1% of the economy.
You’re simply talking about an increase in supply and demand.
Your arguments indicate you do not understand the ABCT.
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Do you agree that someone purchasing an antique toy may pay one price if he thought it would increase in value and another price if he thought its value wouldn’t change?
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Do you agree that, after observing a long period of price rises (for whatever reason), people have a tendency to believe that those prices will continue to rise even if they don’t understand (or even profess to understand) the reason for the price rise?
Your still missing the point. It would be impossible for this isolated bubble to be exacerbated on its own. In such an event prices would rise due to increased demand. That good would naturally get rationed off. Less and less people would be able to afford and therefore the bubble would simply stop happening as the cost of the good become too expensive and the manufacturer would be bidding for resources against other industry’s to keep his bubble afloat.
On it’s own as prices rise people would stop participating in the bubble as it would become un-affordable. What you don’t understand is that despite the fact that housing prices for example had been on a steady climb for a decade the perception was given to people that they could afford it still, despite the costs of the expensive realestate market.
I feel like your about to have an apephany so I want you to answer the q uestion I provided earlier. A simple fill in the blank.
Long term investments become more viable and less risky when the price of _______ is lowered. Fill in the blank. Or my earlier question re-worded.
The price of the commodity __________ was altered which granted people the financial means to afford and participate in the housing bubble. Had the price of ______ been left alone housing prices would have never have risen as demand would have been stifled by the costs. What is ______________
They don’t need to understand the rise. Even if it’s rising, how do people afford to continue to participate in the bubble despite the rising costs? As those prices rise how do people afford to participate in the speculation?
This question becomes irrelevant when you understand my rebuttal to question 2.
If the bubble was in gold for example they could just buy smaller quantities. Or with antique toys they could just buy smaller toys.
Now can you answer my questions?
Another question.
Why is it that half way through the last housing bubble, people didn’t suddenly switch to investing in something else instead? Perhaps gold? Tulip bulbs? Japanese stocks?
Why would they switch to investing in something else? Housing prices were what was going up more…especially since during the recession before that, housing prices didn’t fall, which led to the belief that housing prices couldn’t possibly fall.
Now here is a good example, that if you understood praxeology (as Peter Schiff does) then you wouldn’t even ask questions like this. You wouldn’t have made a blog post about rational exuberance.
You’re fumbling in the dark because you’re too stubborn to learn.
Bingo!
Congratulations. ABCT explained a lot about the bubble but couldn’t explain why there was no switch. Perhaps ABCT needs a little tweak to fully explain the observed bubble. That tweak is the addition of my rational exuberance theory. The theories work in tandem.
Still determined to avoid the questions I see…
what are you both talking about? people did switch away from investing in houses.
what did you think the ‘crash’ was? what ‘popped’?
If a gold bubble existed and the price rose, and ultimately due to price less q uantities of gold were purchased then it wasn’t a bubble and the market was working accordingly. The problem with the bubble is natural rationing does not occur. You just admited that people would buy smaller quantities. That right there is an example of the bubble no longer functioning as a bubble.
Therefore there was no bubble.
In a bubble the volume or quantity isn’t purchased in smaller quantities but in larger, possibly exponential quantities.