Some interesting thoughts on that by Steve Randy Waldman [1]. In this snippet, he's asking whether bubbles promote useful innovation: He went so far as to su

Some interesting thoughts on that by Steve Randy Waldman [1]. In this snippet, he's asking whether bubbles promote useful innovation: He went so far as to suggest that agency problems in the delegated investment process, specifically the inability of career-minded fund managers to stay away from bubbles regardless of any personal reservations, make an important contribution to innovation. Steven Fazzari (whose work on inequality this blog has featured before) described research showing that R&D expenditures of young firms are constrained by external finance and increase in bubblicious periods. Ramana Nanda investigated whether investments made at the top of bubbles were poor, and found that they were not. They were just riskier. Firms funded by venture capitalists in heat were unusually likely to crash and burn, sure, but they were also unusually likely to succeed spectacularly. 1. http://www.interfluidity.com/v2/5066.html http://www.interfluidity.com/v2/5066.html