4 ms·
Basically, people expect momentum. During a boom, people expect values to keep going up which serves to drive values up but eventually they'll get past what is
by drabiega 9y ago
Basically, people expect momentum. During a boom, people expect values to keep going up which serves to drive values up but eventually they'll get past what is reasonable. Once they start correcting downward, people expect them to keep going down which drives them further down until the opposite phenomena occurs and the cycle restarts.
As I recall this has been experimentally verified but I can't remember enough to find a citation.
- collyw 9y agoI would love to read some "experimentally verified" economics, as it is something that economics seems to be lacking.
- drabiega 9y agoExperimental econ is a fairly large sub-field that is very useful for micro phenomena. Unfortunately because even the micro phenomena are complex and difficult to quantify, you can't reliably use micro knowledge to mathematically predict macro phenomena the way you could in something like physics. Since the economics that most non-economists really care about are all macro stuff, this tends to mean that people are not really aware of experimental econ. It's still useful in cases like this, though: You can't experimentally confirm the actual causes of boom and bust cycles, for instance, but you can show that certain conditions are sufficient for the emergence of boom and bust cycles.