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A lot of the things you cite became bubbles BECAUSE of government involvement. In the US and Japan, government is subsidizing the cost of borrowing. It is not

A lot of the things you cite became bubbles BECAUSE of government involvement. In the US and Japan, government is subsidizing the cost of borrowing. It is not freedom that is the problem. It is the socialization of risk that is the problem. In the US, the government insures private pension plans, guarantees home loans, bails out automakers and financial "innovators". There's no incentive to be prudent.

lkrubner 16y ago
I don't think socialization of risk was a factor in the tulip mania that gripped Holland in the 1630s. You can argue that socialization of risk has been factor that has made bubbles much more common over the last 30 or 40 years. That would go to my what I said before - government can stop bubbles, if it wants to. Or it can start them. Without government intervention, bubbles remain rare, which undercuts the thesis of the above article.
- stretchwithme 16y ago
  The causes of each bubble are different. Some theorize that monetary expansion and a conversion of futures contracts for tulips into options contracts played a significant role in the tulip mania. Government can stop bubbles, disease, cheating on one's spouse, failure to wash dishes and a thousand other sins by simply ending freedom. Big deal. Any kidnapper can do that.
  - lkrubner 16y ago
    Are you responding to the article above?
  - lkrubner 16y ago
    You are right to say that it is a big deal. Your point I think largely disproves the article referenced above. Clearly, government regulation can stop asset bubbles. It has before and I'm sure it will again. The government can stop anything by ending freedom.
    - stretchwithme 16y ago
      The problem with government involvement is that it bails out or assumes the costs of disastrous behavior as it regulates to reduce risk. Then over time the lobbyist weaken the regs and another disaster develops, even bigger this time, with the taxpayer holding the bag. Only this time everybody piles in because they know the government will clean it up. And the government, taking the path of least resistance, plays along, amplifying the problems, even passing more laws to subsidize the risky behaviors. They'll get you a tax write-off, help the first time buyers, lower the interest rates, get rid of the capital gains tax. You name it. But the last thing they will do in the midst of a bubble is take action to counter it. Then once the bubble collapses, everybody else pushes for regulation again to restart the whole cycle, most never questioning whether government should be involved in the first place. And government, in control of the debate, finds the exploiters of their policies and offers them up as the chief perpetrators. And live to trash the economy another day.
      - lkrubner 16y ago
        I think we are in agreement that government has the power to stop bubbles with regulation, if it wants to. As I wrote above: "Of course, one might argue that we want bubbles, that such freedom of investment has positive consequences, or that heavy-handed government, while creating some benefits, also imposes large costs that outweigh whatever benefits are being offered. But that would be a separate issue."
- lkrubner 16y ago
  I wonder why this was down voted? Does someone think the socialization of risk was a factor in the tulip mania that gripped Holland in the 1630s? Or that asset bubbles are rare unless the government gets involved? What, exactly did someone disagree with?

lkrubner 16y ago

I don't think socialization of risk was a factor in the tulip mania that gripped Holland in the 1630s. You can argue that socialization of risk has been factor that has made bubbles much more common over the last 30 or 40 years. That would go to my what I said before - government can stop bubbles, if it wants to. Or it can start them. Without government intervention, bubbles remain rare, which undercuts the thesis of the above article.

stretchwithme 16y ago
The causes of each bubble are different. Some theorize that monetary expansion and a conversion of futures contracts for tulips into options contracts played a significant role in the tulip mania. Government can stop bubbles, disease, cheating on one's spouse, failure to wash dishes and a thousand other sins by simply ending freedom. Big deal. Any kidnapper can do that.
- lkrubner 16y ago
  Are you responding to the article above?
- lkrubner 16y ago
  You are right to say that it is a big deal. Your point I think largely disproves the article referenced above. Clearly, government regulation can stop asset bubbles. It has before and I'm sure it will again. The government can stop anything by ending freedom.
  - stretchwithme 16y ago
    The problem with government involvement is that it bails out or assumes the costs of disastrous behavior as it regulates to reduce risk. Then over time the lobbyist weaken the regs and another disaster develops, even bigger this time, with the taxpayer holding the bag. Only this time everybody piles in because they know the government will clean it up. And the government, taking the path of least resistance, plays along, amplifying the problems, even passing more laws to subsidize the risky behaviors. They'll get you a tax write-off, help the first time buyers, lower the interest rates, get rid of the capital gains tax. You name it. But the last thing they will do in the midst of a bubble is take action to counter it. Then once the bubble collapses, everybody else pushes for regulation again to restart the whole cycle, most never questioning whether government should be involved in the first place. And government, in control of the debate, finds the exploiters of their policies and offers them up as the chief perpetrators. And live to trash the economy another day.
    - lkrubner 16y ago
      I think we are in agreement that government has the power to stop bubbles with regulation, if it wants to. As I wrote above: "Of course, one might argue that we want bubbles, that such freedom of investment has positive consequences, or that heavy-handed government, while creating some benefits, also imposes large costs that outweigh whatever benefits are being offered. But that would be a separate issue."
lkrubner 16y ago
I wonder why this was down voted? Does someone think the socialization of risk was a factor in the tulip mania that gripped Holland in the 1630s? Or that asset bubbles are rare unless the government gets involved? What, exactly did someone disagree with?